Good News For Employee Provident Fund Holders As Withdrawals Now Made Easy

Certificate not required for taking advance from the Employees Provident Fund

The government has recently allowed people to withdraw money from Employees' Provident Fund through self-declaration for treatment of an illness, purchase of equipment for any handicap, and funding house building and education. Expected to help around 4 crore EPF members, this will save the time otherwise spent on getting certificates and will speed up the process of withdrawal from EPF.

EPFO members can seek an advance from their corpus without any certificates for the treatment of illness, major surgery as well as hospitalisation of over one month.

EPFO members can seek an advance from their corpus without any certificates for the treatment of illness, major surgery as well as hospitalisation of over one month in case they are suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailment. The advance was earlier granted only after receipt of a certificate from employers or employees that the member or his dependent were not covered under the Employees State Insurance Scheme (ESI). A doctor's certificate regarding the illness was also required. Physically challenged employees will now not be required to produce a certificate from a medical practitioner to withdraw their EPF savings for purchasing any equipment or aid.

Composite Single Page Form for withdrawal

Recently, the EPFO also made withdrawing provident fund savings simpler by introducing a composite single page form for all types of PF withdrawals. EPF subscribers are no longer required to submit evidential documents for withdrawing PF for grant of advances. Previously, employees were required to fill and submit different forms to the EPFO for withdrawing provident fund for different purposes.

Withdrawal up to 90 % to buy a home

EPF members can now withdraw up to 90 percent of their accumulation (employer's as well as employee's share along with interest) in the PF account or the cost of the purchase and construction of property, whichever is less. Earlier, EPFO members could withdraw up to 36 months of basic salary plus dearness allowance for purchase or construction of house or flat and 24 months of basic salary and dearness allowance for purchase of land.

An employee who has been a member of EPF organisation for three years can withdraw money to buy a home.

Also, now an employee who has been a member of EPF organisation for three years can withdraw money to buy a home. Earlier, membership of five years in EPF organisation was required to withdraw the money.

Other conditions to be fulfilled for withdrawal from EPF to buy home:

  • The accumulated EPF balance must be more than ₹20, 000. If the spouse of the member is also an EPF member, then the combined balance will be considered for eligibility.
  • Payment will be made by the EPF organisation directly to the housing society or the government agency or the bank or the prime lending institution and not to the member of EPF organisation.
  • If the amount of such withdrawal is more than the actual cost or expenses of acquiring the property, then member must refund such excess amount to EPF organisation in lump sum within 30 days from the date of allotment/completion of project/alteration of house etc.
  • If the member fails to get allotted a flat/house or in case of cancellation of the allotment, the amount must be refunded to the EPF organisation within a period of 15 days.
  • To withdraw money under this scheme, the EPF organisation member must be a member of the co-operative society or a society registered under any law for housing purpose and should have at least 10 members.
  • EPF member can also opt for payment of monthly installments from the PF money against any outstanding loan to the government/housing agency/primary lending agency or banks. Loan should be in the name of the EPF organisation member or spouse, provided both are EPF members.

Tax on withdrawals from EPF

Tax on EPF is the major concern for every employee. Some believe EPF withdrawal are not taxable, but that is not entirely true. Withdrawal from EPF can be taxable. TDS is also deducted in some cases.

If the employee withdraws the EPF balance before completing 5 yrs of service, then EPF balance is taxable.

For calculating the period of 5 years of service, it is not necessary that service should be continued with the same employer. He may have worked in different organisations. But whenever a person changes job, he must get the PF balance in previous company transferred to new company PF Account.

Can a person withdraw full EPF before retirement?

If a person leaves the job and remains unemployed for 2 months or more, then he/she can withdraw the EPF amount. But full EPF withdrawal is not allowed until the age of retirement. The PF account consists of contribution made by the employer, contribution made by employee and interest earned on employer and employee contribution. Now the employer contribution and the interest earned on it cannot be withdrawn till the age of retirement. Employee can only withdraw his contribution and the interest earned on it.

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