New Delhi, Oct 16 (IANS) The government has simplified the Provident Fund (PF) withdrawal norms, and the employee can withdraw more and earlier after just a period of 12 months.

Earlier, there was complex eligibility criteria in terms of differing minimum service period leading to rejection/delays. Too many provisions for partial withdrawals led to confusion for members and frequent rejection of withdrawal claims.

According to the Ministry of Labour and Employment, the existing 13 types of partial withdrawal provisions have now been merged into one unified and simplified framework.

Prior to the simplification of norms, the member was allowed to withdraw only the employee contribution and interest ranging from 50-100 per cent.

“Now, the withdrawable amount will also include employer contribution besides employee contribution and interest. As a result, 75 per cent of the eligible amount that can now be withdrawn will be much higher than the amount he/she could withdraw under the previous provisions,” the ministry informed.

There were varying eligibility periods of up to seven years that existed earlier, which have now been uniformly set at 12 months for all kinds of withdrawals, creating ease of understanding and facilitating early withdrawal.

Further, repeated withdrawals routinely led to insufficient PF balance at the time of retirement.

Fifty per cent of PF members had less than Rs 20,000 in the PF balance and 75 per cent had less than Rs. 50,000 at the time of final settlement.

Due to repeated withdrawal, the workers with lower salaries did not realise the benefits of compounding at 8.25 per cent and, thereby losing out on higher social security at the end of their working life.

That is why, as per CBT’s decision, 25 per cent of the contribution needs to be retained to ensure respectable corpus at retirement as a safety net and to provide long-term social security.

In case of unemployment, 75 per cent PF balance (that includes employer and employee contribution and interest earned) can be withdrawn immediately.

Remaining 25 per cent can also be withdrawn after one year. Full withdrawal of the entire PF balance (including the minimum balance of 25 per cent) is also allowed in case of retirement after attaining 55 years of service, permanent disability, incapacity to work, retrenchment, voluntary retirement or leaving India permanently etc.

The pension entitlement at the age of 58 years is completely unaffected by the proposed changes. A member can withdraw the accumulation in pension account before completing 10 years of service at any point of time in these 10 years.

However, to qualify for a pension at retirement, a member must complete at least 10 years of EPS membership. About 75 per cent of Pension Members withdraw their entire pension amount within four years of service, i.e. in less than 10 years, ending their membership and making the member ineligible for future pension and social security benefits.

Additionally, if the pension fund is not withdrawn, the member’s family remains eligible for pension benefits for up to three years even after contributions stop—in case of the member’s death. Once withdrawn, this benefit is lost.

In order to encourage members to meet the 10-year eligibility for getting pension and to allow his/her family to be eligible for benefits in case of his/her death, the proposed provision allows the member to withdraw pension accumulation after 36 months instead of 2 months. This will ensure long-term social security in the form of pension for the member and his family.

The EPFO maintains nearly Rs 28 lakh crore corpus and has earned the trust of crores of members due to its robustness, security and higher returns (tax free in many cases).

—IANS

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