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As a measure to improve the financial security of employees after retirement, the central government created the Provident Fund (PF) scheme. Under the PF scheme, both employees and employers contribute an equal amount to the fund. The employee can withdraw the balance amount, including interest, after retirement. It is a long-term savings scheme that allows employees to save a small portion of their monthly income and earn interest.

Provident funds are of three types in India: 

  • Public provident fund for the public

  • Employee provident fund for private sector employees

  • General provident fund for government sector employees

Employee Provident Fund (EPF) 

The EPF allows private sector employees to save a portion of their salary by contributing it to their EPF account. The same amount is contributed by the employer as well. EPF is supervised by the Employee Provident Fund Organization (EPFO). Mainly meant for post-retirement, employees may withdraw from the fund even before retirement to financially support them in expenses pertaining to weddings, housing, etc. 

Organisations with a force of more than 20 employees are obligated to enrol with EPFO. The following schemes are covered under EPF:

  • Employees’ Pension Scheme, 1995 

  • Employees’ Provident Fund Scheme, 1952

  • Employees’ Deposit Linked Insurance Scheme, 1976

employee provident fund

Withdrawal  

Withdrawals from the EPF account are not allowed under the EPF scheme until the employee has stopped working or is self-employed. A declaration mentioning the reasons of withdrawal needs to be submitted by the employee to withdraw from his/her EPF account after quitting the job. An employee can also exchange his/her EPF account when changing jobs. For Withdrawal your Employer’s Provident Fund Amount easily click here.

Withdrawal purposes and rules 

Though withdrawal from the EPF account is not permitted under the EPF scheme, there are certain situations where the employee is allowed to do so. Mentioned below are the reasons for which an employee can rely on his/her EPF for money and the specific rules associated with them: 

  • Repayment of existing home loan: An employee can withdraw a portion of his/her EPF to repay an existing home loan. To qualify for this, the employee must have at least 10 years of service. Withdrawal under this reason can only be obtained only once in his/her lifetime. The property must be registered in his/her name or in their spouse’s name or both. If the loan was taken jointly with the employee’s mother or father, withdrawal won’t be permitted.

 The maximum amount permitted is up to 36 times of monthly wages. The amount can be withdrawn from both the self-contribution fund and the employer contribution.  To obtain the money, the employee has to provide proof of the loan sanction, proof of house agreement and other documents that may be required by the EPFO.  

  • Education (for self or children): The employee can also withdraw for the purpose of education for self or children. Only post-matriculation education expenses are covered. Under this purpose, the employee can avail money from the EPF only after he/she has completed at least 7 years of service. The maximum amount that can be withdrawn is 50% of self-contribution. 

An employee can utilise his/her EPF for this reason for a maximum of 3 times. However, those 3 times include marriage as well. Therefore, money can be withdrawn a total of 3 times for marriage or education. 

Taxes on withdrawal 

  • Wedding (for self, sibling or children): For the purpose of marriage, the employee can withdraw from his/her employee provident fund only after completing at least 7 years of service. This facility can be availed a total of 3 times and withdrawal of not more than 50% of self-contribution is permitted. 

To withdraw funds, the employee is required to provide proofs like the wedding invitation, venue, and marriage date among other documents to the employer for verification. 

  • Renovation of existing home: Withdrawal from the EPF for home renovation is allowed only if the house is over 5 years old. This facility can be availed only once and only after the employee has completed at least 10 years in service. The maximum withdrawal amount that is permitted is 12 times of the employee’s monthly wages. Additionally, this facility can be availed only if the house is in the employee’s name or his/her spouse’s or jointly owned. 

  • Medical treatment: An employee can withdraw from his/her EPF for treating medical issues of self, spouse, parents, and children during the following situations:

  • Major surgery

  • Over 1 month of hospitalisation

  • Treatment of leprosy, paralysis, T.B., cancer, heart ailment, or mental derangement

This facility can be availed by the employee in any part of his/her service period. Up to 6 months wages is the maximum amount permitted to be withdrawn. There is no restriction on the number of times this facility can be availed. 

  • Construction of home: A salaried employee can withdraw from his/her EPF for the purpose of construction of a home or buying a property. This facility can be availed only once after completing at least 5 years of service. Up to 36 times of monthly wages can be withdrawn while purchasing or constructing a house. In the case of buying land, up to 24 times of monthly wages is permitted to be withdrawn. The property should be owned by the employee, his/her spouse, or jointly owned by both. 

The property should be free from any disputes, and proof of registration must be provided to avail this facility.

  • Miscellaneous: There are other reasons for which a salaried employee can choose to withdraw from his/her EPF. They are mentioned below:

  • Moving abroad for a better employment opportunity

  • Settling down abroad

  • Premature retirement as a result of-of physical or mental disability

Taxes on withdrawal 

The amount withdrawn from EPF is tax-free. However, withdrawing the money before completing 5 years of continuous service can lead to serious tax deductions. If the employee withdraws money before the prescribed time period, the tax savings will be nullified and the interest on PF will be counted in the yearly income while filing taxes. 

According to the new TDS rule of provident fund, up to 34.6% can be deducted from the PF account. However, one can avoid the huge tax cut by not withdrawing from the PF account after changing jobs. Transferring the EPF will save taxes. Even if the employee is switching from employment to a business, it is advisable to wait for 5 years before withdrawing the PF money. 


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