Many Employees Provident Fund Organization (EPFO) subscribers have inquired on social media platforms about the interest amount that is yet to be credited to their provident fund accounts. Such questions caught the EPFO management unaware as they ardently requested the subscribers to maintain patience while assuring them that there would be no loss of interest on the amount deposited in their accounts.
However, what also irks the subscribers are the stringent rules and guidelines that prevent them from withdrawing their deposited amount on will. Apart, the fact that the amount continues to be deposited for a prolonged period, i.e., during their entire employment tenure underscores the unwanted fear of not being able to withdraw the money deposited in the EPF accounts when required.
The true essence of the EPF scheme often goes unnoticed by many, as it stands as a retirement benefits program supported by the Indian Government. With a substantial membership exceeding 60 million, it ranks among the country’s most prevalent social security initiatives.
Operating on a contributory framework, the EPF scheme involves joint participation from both the employee and the employer. This collaboration entails a 12 per cent contribution from the employee’s basic salary and dearness allowance, matched by an equivalent 12 per cent contribution from the employer, based on the employee’s gross salary. These contributions are channelled into distinct accounts for each employee, meticulously overseen by the EPFO.
Criteria for EPF withdrawal
You cannot just withdraw the amount from your EPF account as and when you want. There are criteria to be adhered to as the idea is to ensure that people stay invested in this scheme to avail of the high yield stemming from the investment’s compounding effect. Despite being traditional, many people prefer to continue allocating a part of their income to their EPFO accounts to avail of the reasonably high-interest rate revised on a quarterly basis.
Apart, the contributions made by both the employee and the employer towards their EPF accounts are eligible for tax deductions under Section 80C of the Income Tax Act. Moreover, the interest earned and the final withdrawal amount are also exempt from tax.
Specific criteria need to be fulfilled to facilitate the withdrawal of EPF funds. It’s imperative for members to acquaint themselves with the stipulated conditions governing EPF withdrawal. These conditions include:
Continued unemployed status
In the event of unemployment, an EPF account holder is eligible to withdraw 75 per cent of their accumulated EPF balance after a period of one month of joblessness. Furthermore, the remaining 25 per cent can be withdrawn if the unemployment duration extends beyond two months.
To initiate the withdrawal of EPF funds due to unemployment, the account holder must complete a withdrawal application form and furnish evidence of their joblessness. This evidence can take the form of an official letter from the employer confirming the termination of employment or a copy of the employee's resignation letter.
Medical emergencies
An EPF participant has the provision to withdraw their account balance for pressing medical needs concerning themselves or immediate family members. The classification of immediate family members encompasses:
- Spouse
- Children
- Parents
- Parents-in-law
- Dependent siblings
The withdrawal sum comprises the employee's contribution coupled with an interest or an amount equivalent to six months of basic wage and dearness allowance, whichever is lesser.
To effectuate the withdrawal of EPF funds for medical purposes, the account holder is required to furnish a withdrawal application form along with a medical certificate issued by a government hospital or a recognized private healthcare facility. The medical certificate should detail the nature of the ailment and the financial requirement for treatment.
The following supplementary documents may be requisite for EPF fund withdrawal in the context of medical expenses:
- A copy of the account holder's PAN card
- A copy of the account holder's Aadhaar card
- A copy of the medical certificate
- A copy of the hospital bill
Facilitating the process, the withdrawal procedure for EPF funds earmarked for medical exigencies is relatively uncomplicated. It can be seamlessly completed online via the EPFO website or the UMANG app.
Repayment of home loans
An EPF participant has the option to withdraw a substantial portion, up to 90%, of their amassed savings to settle a home loan liability. However, this withdrawal is permissible only if the member has fulfilled a minimum tenure of three years in service with their present employer.
To initiate the withdrawal of EPF funds for the purpose of repaying a home loan, the account holder is required to submit a withdrawal application form accompanied by a duplicate set of the home loan documentation. These documents must comprehensively detail the loan quantum, interest rate, and the outstanding balance yet to be cleared.
The following additional documents may be necessary for the withdrawal of EPF funds earmarked for home loan settlement:
- A copy of the account holder's PAN card
- A copy of the account holder's Aadhaar card
- A copy of the pertinent home loan papers
- A copy of the most recent salary statement
The EPF withdrawal procedure concerning the repayment of a home loan is comparatively straightforward and can be conveniently accomplished through online channels.
TDS on EPF withdrawal
The EPFO levies a TDS rate of 34.6 per cent on premature EPF balance withdrawals, specifically when the withdrawal transpires prior to completing 5 years of service and the accumulated sum exceeds Rs. 50,000, provided the PAN has not been furnished.
However, this TDS deduction can be averted by presenting either Form 15G or Form 15H. Form 15G serves as a self-declaration, affirming that the employee's income falls beneath the taxable threshold, thereby obviating the need for a TDS deduction. In contrast, Form 15H functions as a self-declaration, indicating the employee's senior citizen status and consequent exemption from TDS deduction.
It is essential to recognize that TDS will be subtracted during the withdrawal process, regardless of whether the employee subsequently files their income tax return and seeks a TDS refund later in the fiscal year.
Outlined below are the steps for withdrawing EPF funds prior to completing five years of service while sidestepping TDS:
- Lodge Form 15G or Form 15H alongside your withdrawal application form with the EPFO
- The EPFO will conduct a verification of your PAN and income particulars
- If your PAN is successfully verified and your income falls below the taxable limit, the EPFO will refrain from TDS deduction.
However, if your PAN verification is unsuccessful or your income surpasses the taxable threshold, the EPFO will effectuate a TDS deduction at a rate of 34.6 per cent.
Following the deduction of TDS, you will receive the disbursed EPF withdrawal amount.
By adhering to this procedure, individuals can successfully withdraw EPF funds before fulfilling the five-year service criterion, while steering clear of TDS deductions.
