The Union labour ministry has simplified and liberalised the partial withdrawal rules under the Employees’ Provident Fund (EPF) scheme, making it easier for its more than seven crore subscribers to withdraw up to 100 per cent of their EPF from their provident fund accounts. Notably, the Employees’ Provident Fund Organisation (EPFO) manages the retirement savings of nearly 70 million salaried workers across sectors.
The Central Board of Trustees (CBT), the EPFO's apex decision-making body, headed by Labour Minister Mansukh Mandaviya, made many decisions during its meeting, the above being one of them, according to an official statement.
Apart from the decision to allow up to 100 per cent EPF withdrawal, other measures include launching the ‘Vishwas Scheme’ to reduce litigation, introducing Doorstep Digital Life Certificate services, and approving EPFO 3.0 to upgrade provident fund services.
Provident funds provide retirement income and a social safety net for workers in the formal sector.
Here is everything you need to know:
Norms for PF withdrawal eased
- Partial withdrawals from PF accounts are now allowed under three categories: essential needs such as illness, education, and marriage; housing; and special circumstances. “The last category is open ended that may cover any permissible pressing urgency,” an official told Hindustan Times.
- Members can now withdraw up to 100 per cent of their eligible Provident Fund balance, including both the employee and employer contributions.
Withdrawal limits relaxed
- Withdrawal limits have been relaxed: education withdrawals can be made up to 10 times and marriage up to 5 times, compared with the previous total limit of three partial withdrawals for both marriage and education.
- The minimum service requirement has been reduced to 12 months for all partial withdrawals.
- Previously, under ‘Special Circumstances,’ members had to explain the reasons for withdrawals, such as natural calamities, lockouts, closure of establishments, continuous unemployment, or epidemics. This often caused claims to be rejected and led to grievances. Now, members can apply under this category without giving any reason.
- A provision requires members to maintain 25 per cent of their contributions in their account as a minimum balance. This allows members to earn a high interest rate offered by the EPFO (currently 8.25% per annum) with compounding benefits to help build a larger retirement fund.
‘Vishwas Scheme’ launched
- The EPFO has also introduced the 'Vishwas Scheme’ to reduce litigation by rationalising penal damages. The ministry said that one major cause of disputes has been the penalty for late PF remittances. Under the Vishwas Scheme, penal damages will be reduced to a flat 1 per cent per month, with a graded rate of 0.25 per cent for defaults up to two months and 0.50 per cent for defaults up to four months.
Under the Provident Funds Act, all firms with 20 or more employees must register with the EPFO. Employers and workers each contribute 12 per cent of a person’s basic salary to the fund managed by the EPFO. The latest changes were approved by the EPFO’s central board of trustees on Monday.
{{/usCountry}}Under the Provident Funds Act, all firms with 20 or more employees must register with the EPFO. Employers and workers each contribute 12 per cent of a person’s basic salary to the fund managed by the EPFO. The latest changes were approved by the EPFO’s central board of trustees on Monday.
{{/usCountry}}With inputs from agencies