EPFO clarifies 75% of funds can be withdrawn immediately if unemployed, 100% when without job for a year

“75 per cent of the amount can be withdrawn immediately after leaving the job, and the full amount can be withdrawn after being unemployed for one year. Frequent withdrawals earlier caused breaks in service, leading to rejection of many pension cases. At the time of final settlement, employees were left with very little money,” a statement from the Ministry of Labour and Employment, which oversees EPFO, said.

“The above provisions will ensure continuity of the employee’s service, a better final PF settlement amount, and financial security for the family,” it added.

These changes — along with a relaxation in withdrawal norms for education, illness, housing and special circumstances — are expected to come into effect in the next 1-2 months.

Change in withdrawal condition during unemployment

In its 238th meeting on Monday, the EPFO’s Central Board of Trustees approved a slew of changes to make it easier for people to dip into their provident fund corpus by streamlining withdrawal categories to three — essential needs (illness, education, marriage); housing needs; and special circumstances — from 13 categories at present.

It, however, introduced two other significant changes regarding minimum balance and premature final settlement in cases such as withdrawal at the time of unemployment. The members can withdraw 75 per cent of their corpus and would be required to earmark 25 per cent of the contributions in their accounts as the minimum balance at all times.

For premature final settlement, earlier, if an EPFO member stayed unemployed for two months, they could withdraw their entire corpus. The EPFO has now increased this time period for availing premature final settlement of provident fund during unemployment from the existing two months to 12 months. The minimum time period for final pension withdrawal has also been increased from two months to 36 months.

The fine print implies that a member can withdraw 75 per cent of the corpus including employee and employer share, say, under special circumstances category, if he or she is unemployed and can also withdraw the remaining 25 per cent, making it 100 per cent, if he or she stays unemployed for 12 months under the premature settlement rule.

Changes for other categories

The categories for drawing out funds have been streamlined from the current 13 to just three — essential needs (illness, education, marriage); housing needs; and special circumstances.

Withdrawal limits for education or illness have been made more flexible. Partial drawals can now be made 10 times for education during the membership and 5 for marriage, as against the existing limit of 3 partial withdrawals for marriage and education combined. Under illness and ‘special circumstances’ categories, withdrawals will be allowed 3 times and 2 times every financial year.

In any special circumstances or emergencies, the full eligible amount can be withdrawn up to twice a year without any questions asked, the Ministry said.

“Earlier, there were 13 different categories with numerous conditions under which money used to get locked. These have now been completely simplified into one uniform provision, making it much easier to withdraw money without any documentation,” the Ministry said.

The requirement of the minimum service period to withdraw funds has also been raised for the various categories. Now, withdrawal can be made after 12 months of EPFO membership from the minimum 5 years for housing earlier, minimum 7 years for education & marriage, and any time during service for other withdrawals.

Why the change in withdrawal conditions?

As per EPFO data, about 50 per cent of EPF members have less than Rs 20,000 at the time of final settlement, and 75 per cent of pension withdrawals happen within 4 years, an official said.

The official said that EPFO’s data shows that the same person, after 2 months (of unemployment) and after withdrawing the entire PF amount, is again rejoining another company. So, the members are left with less money at the time of the end of service by withdrawing the entire amount and also not being eligible for a pension, the official added.

The withdrawal norms have been simplified into one uniform provision, making it easier to withdraw money without any documentation, the Ministry said.