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2016

Changes after Budget in Employee Provident Fund (EPF)

Full EPF balance cannot be withdrawn (limit on early PF withdrawals)

  • Existing Rule : The EPF members (employees) can withdraw the full EPF balance after 60 days of unemployment. (The EPF balance consists of employee’s contributions + employer’s contributions + interest amounts. Every month 12% of your “salary” is contributed towards EPF account).
  • New Rule : The EPF members can not withdraw full PF amount before attaining the age of retirement. The maximum withdrawal on cessation of employment cannot exceed an amount aggregating employee’s own contribution and interest accrued thereon. You can withdraw your contributions + interest portion only. The employer’s portion can be withdrawn after attaining the retirement age (58 years).

Continuity of your EPF membership

  • Existing Rule : If an employee withdraws full EPF amount after resigning from the job, his/her PF membership is deemed to be terminated. That means he/she is not a member of EPF scheme after the full withdrawal.
  • New Rule : An employee can only withdraw his share on resigning from the job. You can not withdraw full EPF amount before attaining the retirement age. So, you will still be the member of EPF even if you cease to be an employee of a EPF covered establishment. I believe that concept of ‘In-operative EPF a/c‘ may cease to exist.

Retirement Age

  • Existing Rule : The retirement age is considered as 55 years.
  • New Rule : The age of retirement has now been increased from 55 to 58 years.

EPF Withdrawal provisions

  • Existing Rule : You (employee) can withdraw the full PF amount on retirement from service (55 years) or on cessation of employment and not being employed for at least 60 days.
  • New Rule : As discussed above, the retirement age has now been increased from 55 to 58 years and the option of full EPF withdrawal on resignation will not be allowed. You can withdraw your contributions + interest portion only.

90% of EPF balance

  • Existing Rule : You can withdraw up to 90% of your entire PF balance (employee share + employer share) on attaining 54 years of age or within one year before actual retirement, whichever is later.
  • New Rule : You would now be able to avail this option only on attaining the age of 57 years. The age has now been increased from the current 54 years to 57 years.
  • Employee contribution during separation :
    • Only employee contribution can be withdrawn along with interest due after 2 months of separation from services and not joining any other organization covered under EPFO.
    • Employer contribution will continue to accrue and can only be withdrawn at attaining 58 years.
    • Basically, the EPF savings is meant as provision for Retirement. So now EPFO has bought in sweeping changes which has stopped benefits of early withdrawal and EPF amount will be paid to you only when you attend 58 yrs of age.
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