EPF Withdrawal Rules: For Home Loan, Medical, Retirement

Employees’ Provident Fund (EPF) is an investment fund which is built over the long-term on the contributions made by the employee, employer and the government (in some cases). It is the social security program managed by the government to provide a safety net to people on their retirement. The amount invested over the years, along with specified interest, is paid out to an employee on his/her retirement. However, there are various EPF withdrawal rules that one needs to adhere to in order to make withdrawals from the PF account.

EPF in India is administered by a statutory body called the Employees’ Provident Fund Organisation (EPFO). 12 % of the salary (basic + dearness allowance) is contributed by the employee towards the Employees’ Provident Fund. An equal contribution is made by the employer as well. However, it’s important to note that only 3.67% of the employer’s contribution goes towards Employees’ Provident Fund (EPF) account and the rest 8.33% gets deposited in the Employees’ Pension Scheme (EPS).

Employees’ Provident Fund can be withdrawn in either of the below cases-

• At the time of retirement (On or after 58 years of age)
• If unemployed for two months of time
• Death before the specified retirement age

EPF Withdrawals- All you Need to Know

Eligibility on various Types of EPF Withdrawals

• For Medical Purposes-
  • An employee is allowed to withdraw employee’s share with interest or six times the monthly salary (whichever is lower) from the provident fund for the purpose of medical treatment
  • This withdrawal is applicable for medical treatments of self, spouse, children, and parents
  • There is no lock-in period or minimum service period for this type of withdrawal
• For Repaying Home Loan-
  • For the purpose of repaying the outstanding home loan, the PF member is allowed to withdraw up to 90% of the corpus if the house is registered in his or her name or held jointly
  • However, to withdraw the amount, at least 3 years of complete service is required
• For Wedding- 
  • At least 7 years of service must be completed in order to be eligible for the withdrawal
  • 50% of the employee’s contribution with interest can be withdrawn
  • An employee can withdraw funds for his own, siblings or child’s marriage
• For Renovating and Reconstructing a House-
  • The employee can withdraw funds from his EPF account for the purpose of renovation and reconstruction
  • The house should be held in his/her name or held jointly with the spouse
  • The employee must complete at least 5 years of total service
  • The member can withdraw 12 times his monthly salary from his Provident fund account
• For Purchasing or constructing a New House-
  • A PF member can withdraw a partial amount from his employee provident fund for the purpose of purchasing a plot and/or constructing it
  • The property should be registered in his or her name or held jointly with the spouse
  • An employee should have completed a minimum of 5 years of total service
  • 24 times of the monthly salary for purchasing a plot/36 times of the monthly salary for purchasing or constructing a house or the cost of the property or the total of employee’s and his employer’s share along with the interest amount (whichever is less) can be withdrawn
  • Withdrawal is allowed only after completing 5 years of service
  • Withdrawal for the purpose of purchasing a plot and constructing it can be done only once in the entire service tenure
• Retirement-
  • A person can withdraw his or her entire provident fund corpus after completing 58 years of age
  • The employee is allowed to withdraw up to 90% of the provident fund balance
• Unemployment-
  • A person can withdraw 75% of his or her provident fund if he/she is unemployed for more than a month
  • For unemployment of more than 2 months, remaining 25% of the corpus can be withdrawn

EPF Withdrawal Rules 

Employees’ Provident Fund is an investment scheme created for the purpose of retirement. Withdrawal should be prevented until and unless it is an emergency. However, in case a member wants to withdraw funds from his EPF account, he should keep the following EPF withdrawal rules in mind-

• Provident Fund that is withdrawn within 5 years of account opening is taxable
• It’s not necessary to withdraw provident fund when you change your employer as PF can easily be transferred to a new account through the online process
• As per the rules, one cannot withdraw Provident Fund balance of a job where you are currently employed
• Loan (Partial withdrawal) can be availed on employee provident fund

Considering the early withdrawals by the employees, the Government of India made some amendments to employee provident fund in 2016. Here are the main amendments to EPF withdrawal rules-

• 90 % of the EPF balance can be withdrawn after the age of 54 years
• After leaving a job, a person can withdraw 75% of the provident fund balance if he remains unemployed for 1 month and the remaining 25% after the second month of unemployment

EPF Withdrawal before 5 years of Service

EPF withdrawal before 5 years of continuous service attracts TDS on the withdrawal amount. However, if the withdrawal amount is less than ₹ 50,000, no TDS is deducted. In case you want to withdraw your funds before 5 years of service, you should keep the following EPF withdrawal rules in mind-

• As per the latest modification in ITR Forms 2 and 3, the assessee has to provide a detailed breakup of the entire amount deposited in PF account every year
• This will help the Income Tax Department to assess whether the withdrawal made by you is taxable or not
• The department will also check whether additional tax has to be paid by you after revaluation
• EPF contribution is done in four parts – Employee’s contribution, employer’s contribution and interest on each deposit
• If the employee has claimed exemption on EPF contribution for previous years as per Section 80-C, all four parts will be taxable
• If the employee has not claimed exemption in the previous year on EPF, the employee’s contribution part will be exempted from tax at the time of withdrawal
• The tax will depend on the income slab in which the employee fell for that year
• The tax will be applicable in the year of withdrawal but the consideration will be done for each year

Withdrawal after Retirement

• As per the EPF Act, when a member retires at the age of 58 years, he has to apply for the claim of his final settlement
• The total PF balance consists of both employee’s as well as the employer’s contribution
• The member also becomes eligible for the EPS amount if he has served for a period of more than 10 years in continuation
• In case the member has not completed 10 years of service at the time of retirement, he can withdraw the complete EPS amount along with his EPF
• If he completes 10 years of service, the employee gets pension benefits after retirement
• The withdrawal of corpus accumulated in the EPF account after retirement is completely tax-free
• The interest earned on the EPF corpus after retirement is taxable
• An employee who has registered at the EPF member portal can fill the form and claim his funds online
• If the member does not withdraw funds for three years after retirement, he will have to pay tax on the interest earned

PF Withdrawal for Home Loans

EPF members can utilize the fund accumulated in their EPF account to facilitate their housing needs after three years of account opening. As per the newly added Para 68-BD in the EPF Scheme, 1952, EPF members can apply for a withdrawal of up to 90% of the accumulated corpus for either making the down payment of the house or for the payment of EMIs or for the construction of a new house.

Earlier, the maximum withdrawal amount was limited to the total contribution of the employee and the employer with interest of 36 months or the cost of the property, whichever was less. The member was also not required to be a member of the housing scheme to avail this facility. He just had to be a member of the EPF for five years.

After the insertion of Para 68-BD in the EPF Scheme, 1952, the members got more options to utilize their funds. The time limit (from account opening) has also been reduced to 3 years. The minimum PF balance of the member should be more than ₹ 20,000 either individually or including that of the spouse in case he/she is also a member of the EPFO. However, a member can withdraw the PF balance only once in a lifetime to pay for the property.

Some important features of home loans on EPF are as follows-

• The applicant should be a member of a registered housing society having at least 10 members
• The bank can use the Commissioner’s certificate of PF contributions to calculate EMIs for withdrawal
• Composite claim forms can be used to avail this facility
• The member has to provide the letter of authorization for paying EMI from PF
• The facility can be clubbed with Pradhan Mantri Awas Yojana (PMAY) to avail subsidy on housing

How to Apply for Home Loans on EPF

Follow these simple steps to utilize your EPF for repaying your home loan as per the updated EPF withdrawal rules-

• A PF member can apply for the loan through the housing society to the EPF Commissioner in the format prescribed in Annexure 1
• The Commissioner issues a certificate specifying the monthly contribution of the last 3 months
• PF members can also get the EPF passbook printed to show the EPF contribution for the last 3 months
• EPFO makes the payment directly to the agency (government or private)
• Members can opt for lump sum withdrawal or EMIs

Documents Required for PF Withdrawal

• The UAN (Universal Account Number) is a compulsory requirement and can be obtained from the employer
• Bank account details need to be clearly given with the name as per the EPF account
• The bank account has to be in the name of provident fund holder as funds cannot be transferred to the third party when the holder is alive
• Personal information like father’s name and date of birth should match clearly with the identity proof
• The employer should submit the details to EPFO (Employee Provident Fund Organization) and register the exit of an employee from the organization. Date of joining and date of leaving needs to be clearly mentioned

Process to Withdraw Employees’ Provident Fund (EPF)

The balance in Employees’ Provident Fund can be withdrawn either online or offline. 

Provident Fund Withdrawal via New Form

This method gives a big relief to every employee as it does not require the employer’s attestation or approval. However, if an employee wishes to follow this method, he or she needs to submit the Aadhaar number at UAN portal. It’s important to submit the Aadhaar and get it authenticated by the employer. Here are some simple steps to follow-

• Update your Aadhaar number in UAN portal
• Get the Aadhaar authenticated by the employer and link it to UAN
• Fill the withdrawal form online at the EPF member portal
• Submit the duly filled form and you will get the withdrawn amount in your bank account in a fortnight

As the withdrawal process is not routed through the employer and is a direct way of submission, the processing time is quicker than the offline process.

Provident Fund Withdrawal via Old Form

As per the updated EPF withdrawal rules, follow the steps mentioned below-

• Contact the HR team of your previous employer to obtain Form 19 for EPF withdrawal. The form can also be downloaded from the EPFO’s website
• Fill in all the required details such as PF account number, employment details, bank account details with the IFSC code, etc.
• You may have to submit a cancelled cheque leaf of the bank account for reference
• Submit the duly filled form to your employer
• Your employer will attest the form and send it to the regional provident fund office for processing

The withdrawn amount will be directly credited to your bank account. This method may take a relatively longer duration than the online process. Additionally, with the online PF facility, the application status can be tracked.

Taxation on EPF Withdrawal

• TDS is deducted on withdrawal before completing 5 years of service
• TDS is deducted at a rate of 10% on withdrawal if PAN is furnished and 34.608% if PAN is not furnished
• However, if the withdrawal amount is less than ₹ 50,000, no TDS is deducted

However, TDS is not applicable to some of the below cases-

• TDS rule is not applied when termination of your service is out of your control. Company lockouts, retrenchments and employee layoffs etc. could be some of the reasons
• TDS is not applicable when the service cannot be continued due to some serious medical condition such as physical disability or mental disability

How to avoid TDS on PF Withdrawal

The tax burden is heavy on early withdrawals of EPF. Here is how you can avoid it-

• Do not withdraw your EPF corpus when changing your job. Instead, transfer the EPF account to a new one
• Do not withdraw EPF when you are on a career break. You can earn interest on your PF balance for up to 3 years without any contribution. However, the interest earned during this period is taxable
• Withdrawal of funds after 5 years of service attract no TDS