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PF withdrawal may be capped at 75% to check 'misutilisation'

The Employees’ Provident Fund Organisation (EPFO) is planning to limit PF withdrawals to 75% to check “misutilisation” of the fund and ensure its availability as a post-retirement security in old age. Sources said the cap may be further reduced to 50% in the future with limits on the number of withdrawals as well.

business Updated: Jul 07, 2015 07:54 IST
HT Correspondent
HT Correspondent
Hindustan Times
Provident Funds,Caps,UAN
Employees-Provident-Fund-Organisation-HT-Photo

The Employees’ Provident Fund Organisation (EPFO) is planning to limit PF withdrawals to 75% to check “misutilisation” of the fund and ensure its availability as a post-retirement security in old age. Sources said the cap may be further reduced to 50% in the future with limits on the number of withdrawals as well.

Under existing norms, subscribers can withdraw 100% of their provident fund after two months of unemployment or for higher education, construction of a house and marriage among other purposes. Of the 1.30 crore PF claims that the EPFO handles every year, more than 65 lakh are for 100% withdrawals.

There are also no limits on the number of withdrawals at present.

“The existing regulations allow full withdrawal for various provisions, and we feel this has been misutilised by employees who treat PF account as a savings bank account. The new regulation will stop the misutilisation and the PF money will be used as old-age security,” EPFO commissioner KK Jalan said.

The proposal to limit withdrawals to 75% – to be notified in a few days -- will also help maintain continuity of the Universal Account Number (UAN) which has been provided to each PF subscriber. UAN is a permanent account number that enables employees to maintain a single PF account while switching jobs. “A minimum of 25% PF money in the account will ensure the UAN facility remains active even when an employee switches jobs,” said Jalan.

To discourage premature withdrawals, the EPFO had in May issued a notification that introduced TDS deduction on withdrawals from accounts with over Rs 30,000 where the subscriber has been service for less than five years.

First Published: Jul 07, 2015 00:24 IST