The subscribers of the Employees’ Provident Fund Organisation (EPFO), the State-run retirement savings manager, can now withdraw up to ₹1 lakh at once for personal financial needs from their accounts, which was earlier capped at ₹50,000, Union labour minister Mansukh Mandaviya said on Tuesday.
The labour ministry has also introduced several changes in the EPFO’s operations, including a new digital architecture, as well as norms to make it more flexible and responsive so that subscribers don’t face inconveniences, the minister said. Employees who are new and have not completed six months in the current job are now also eligible to withdraw amounts, which was earlier prohibited.
“People often turn to their EPFO savings to meet expenses such as weddings and medical treatment etc. We have enhanced the withdrawal limit to R s 1 lakh at a time,” Mandaviya said on the occasion of the government’s 100 days in office.
The new withdrawal limit was raised because the older cap had become outdated in view of changing consumption expenditures.
Provident funds offer retirement income to over 10 million employees in the organised sector. It often is the key corpus of lifetime savings for working people. The savings interest rate offered by EPFO, at 8.25% for FY24, is a widely watched metric of the salaried middle-class.
{{/usCountry}}Provident funds offer retirement income to over 10 million employees in the organised sector. It often is the key corpus of lifetime savings for working people. The savings interest rate offered by EPFO, at 8.25% for FY24, is a widely watched metric of the salaried middle-class.
{{/usCountry}}In another key change, the government has exempted organisations not part of EPFO to switch to the State-run retirement fund manager. Some businesses are allowed to run their own private retirement schemes because they are exempted, mainly because their funds pre-date the EPFO’s establishment in 1954.
“There are 17 such companies with a total workforce of 100,000 and a corpus of ₹1000 crore. If they want to switch to EPFO instead of their own fund, they will be allowed. The government’s PF savings give better and stable returns,” the minister said.
Some firms, such as Aditya Birla Ltd, have reached out to the government for such an arrangement, an official said, prompting the government to tweak its policy.
The minister said the government was working on plans to increase the income threshold of ₹15,000 of salaried employees that makes provident fund contributions mandatory. The government will also raise the income threshold of ₹21,000 that is applicable to Employees’ State Insurance.
Employees who earn more than ₹15,000 will be have the flexibility to determine what proportion of income they would like to save for retirement benefits and pension, Mandaviya said.
Provident-fund savings are mandatory under the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 for a firm having 20 or more employees. At least 12% of an employees’ salary is compulsorily deducted to be saved in provident funds, while an employer co-contributes another 12%.