What is Employee Provident Fund (EPF)?
Employee’s Provident Fund is a compulsory component of the salary of employees. A part of the basic salary of the employee (12% of the basic salary and dearness allowance) is directed to the EPF account, and then the employer pays the remaining salary. Apart from the employee’s contribution, the employer is also required to contribute an equal amount of the employee’s basic salary, i.e., 12% of the basic salary and dearness allowance, towards the EPF account. The purpose of EPF investments is that the employee can create a good retirement corpus over his period of active service. There are various benefits of EPF :
- This retirement corpus would then provide employees with funds to meet their retirement expenses.
- EPF contributions also give employees tax benefits.
- The investment made towards the EPF account is allowed as a deduction under Section 80C up to INR 1.5 lakhs. The interest earned is tax-free, and the amount received upon maturity of the EPF account is also tax-free.
When Can You Withdraw EPF?
One may choose to withdraw EPF entirely or partially
Maturity of EPF
EPF can be withdrawn entirely under specific circumstances, such as retirement or unemployment. Upon retirement, individuals are eligible to withdraw the full accumulated corpus. In the case of unemployment, they can withdraw up to 75% of their EPF balance after being unemployed for over one month, and the remaining 25% can be withdrawn after two months of unemployment. However, complete withdrawal is not allowed while switching employers unless there is an unemployment gap of at least two months between jobs.
EPF Partial Withdrawals
EPF account allows partial withdrawals for specific purposes. If you need funds for arranging a wedding, buying a home, renovating a house, paying off a home loan, dealing with medical emergencies, meeting education costs, etc., you can withdraw from the EPF account. However, such withdrawals are subject to certain terms and conditions.
- Marriage
Account holders can withdraw up to 50% of their own contributions to cover marriage expenses. This applies not only for the account holder’s own marriage but also for the marriage of their children, siblings, or eligible dependents, provided they have contributed to the EPF for at least 7 years.
- Unemployment
In case of unemployment, account holders are allowed to withdraw 75% of the accumulated amount after being unemployed for 1 month. If unemployment continues for more than 2 months, they can also withdraw the remaining 25%.
- Medical Emergencies
To cover urgent medical treatment for themselves or their family members, employees can withdraw up to six months’ basic wages plus dearness allowance, or their own contribution with interest, whichever is lower.
- Education
For higher education or a child’s education after class 10, account holders may withdraw up to 50% of their own contributions, provided they have completed at least 7 years of EPF contributions.
- Home Renovation
EPF rules allow withdrawals for home improvement, up to 12 months of basic wages plus dearness allowance, or the employee’s contribution with interest—whichever is lower. This can be done twice: once 5 years after construction and again after 10 years.
- Specially-abled Individuals
Specially-abled account holders can withdraw up to six months’ basic wages or their contribution with interest to purchase assistive equipment.
- Existing Debts
For home loan repayments, individuals can withdraw up to 36 months of basic wages plus dearness allowance, or their total contribution with interest. This option requires a minimum of 10 years of contributions.
- Pre-Retirement
EPF allows withdrawals of up to 90% of the accumulated balance one year before retirement, or after the account holder reaches 54 years of age.
TDS on EPF withdrawals
TDS on EPF withdrawals is mandatory under Section 192A of the Income Tax Act, with specific rules for exemptions and conditions based on service duration and PAN availability.
Under Section 192A of the Income Tax Act, when you withdraw money from your EPF account, a certain percentage of the total amount is deducted as TDS, and the remaining balance is credited to you. TDS is applicable on EPF withdrawals under certain conditions.
- The employee withdraws more than INR 50,000
- The employee has not completed 5 years of active employment
If EPF is withdrawn before completing 5 years of service, TDS is deducted at 10% on withdrawals exceeding ₹50,000, provided the employee submits their PAN. No TDS is deducted if the withdrawal amount is less than Rs 50,000. However, if PAN is not provided, TDS at 30% is applicable on the withdrawal.
Both these conditions, when fulfilled, would result in a TDS application on the amount withdrawn. Here’s a brief look into the TDS application when the above-mentioned conditions are combined –
| The employee has not completed 5 years of service and withdraws more than INR 50,000 from the EPF account |
TDS would be levied |
| The employee has not completed 5 years of service and withdraws less than INR 50,000 from the EPF account |
No TDS would be levied |
| The employee has completed 5 years of service and withdraws more than INR 50,000 from EPF account |
No TDS would be levied |
| The employee has completed 5 years of service and withdraws less than INR 50,000 from EPF account |
No TDS would be levied |
Example
Suppose the salary (basic + dearness allowance) of Mr. Sharma is INR 6 lakhs annually. His salary increases by INR 2 lakhs every year. The EPF contributions would be 12% of the annual salary. Mr. Sharma’s contribution to the EPF scheme for different financial years would be as follows –
| Financial year |
Salary income |
Mr. Sharma’s contribution |
Interest @8% (assumed) |
Employer’s contribution |
Interest @8% (assumed) |
| 2015-16 |
6 lakhs |
72,000 |
5760 |
72000 |
5760 |
| 2016-17 |
8 lakhs |
96,000 |
7680 |
96,000 |
7680 |
| 2017-18 |
10 lakhs |
120,000 |
9600 |
120,000 |
9600 |
| 2018-19 |
12 lakhs |
144,000 |
11520 |
144,000 |
11520 |
His tax liability for the above-mentioned financial years would be as follows –
| Financial year |
Salary income |
Section 80C deduction for EPF contribution |
Tax liability |
| 2015-16 |
6 lakhs |
72,000 |
10% on 2.5 lakhs + 20% on 28,000 = 30,600 |
| 2016-17 |
8 lakhs |
96,000 |
10% on 2.5 lakhs + 20% on 2.04 lakhs = 65,800 |
| 2017-18 |
10 lakhs |
120,000 |
5% on 2.5 lakhs + 20% on 3.8 lakhs = 88,500 |
| 2018-19 |
12 lakhs |
144,000 |
5% on 2.5 lakhs + 20% on 5 lakhs + 30% on 56,000 = 129,300 |
If Mr. Sharma withdraws his contributions from the EPF scheme completely, his tax liability will be calculated as follows –
| Financial year |
Salary income |
EPF contributions of self and employer, including interest earned on both |
Withdrawal Section 80C deduction for EPF contribution |
Total taxable income |
Revised Tax liability |
Tax already paid |
Tax payable |
| 2015-16 |
6 lakhs |
155,520 |
72,000 |
827,520 |
10% on 2.5 lakhs + 20% on 327,520 = 90,504 |
30,600 |
59,904 |
| 2016-17 |
8 lakhs |
207,360 |
96,000 |
11,03,360 |
10% on 2.5 lakhs + 20% on 5 lakhs + 30% on 103,360= 156,008 |
65,800 |
90,208 |
| 2017-18 |
10 lakhs |
259,200 |
120,000 |
13,79,200 |
5% on 2.5 lakhs + 20% on 5 lakhs + 30% on 379,200= 226,260 |
88,500 |
137,760 |
| 2018-19 |
12 lakhs |
311,040 |
144,000 |
16,55,040 |
5% on 2.5 lakhs + 20% on 5 lakhs + 30% on 655,040 = 309,012 |
129,300 |
179,712 |
So, though Mr. Sharma withdrew the balance in the financial year 2019-20, the tax liability is calculated considering the tax slab rate of the year in which investments were made.
Exemption from TDS on EPF withdrawals
There are instances when TDS is not levied on EPF withdrawals even though the amount is more than INR 50,000 and the employee has not completed 5 years of service. These instances include the following –
- When the EPF is transferred from one PF account to another PF account (generally done in case of a job change)
- When the employee’s services are terminated because of his bad health when the business is discontinued, when the project is completed, or in case of any other reason that is not under the control of the employee
- If the employee has submitted his PAN details and Forms 15G or 15H
Recognition of the EPF fund
If the EPF fund is not recognized by the Commissioner of Income Tax, it would not be called a recognized provident fund. If any withdrawal is being made from an unrecognized provident fund, the withdrawal will attract TDS irrespective of the amount withdrawn and the completed years of service.
What is the EPF interest rate for the year 2023?
The declared EPF interest rate for the applicable fiscal year 2022-23 is 8.10%.
How to Withdraw EPF Amount
EPF withdrawal can be done either through a Physical Application or Online Application.
Physical Application
You can withdraw your EPF balance by submitting a physical application using one of the following forms:
Composite Claim Form (Aadhaar)
- Use this form if your Aadhaar and bank details are linked to your UAN (Universal Account Number) on the EPF portal, and your UAN is activated.
- Fill out the form and submit it to the respective EPFO office directly. No employer attestation is required.
Composite Claim Form (Non-Aadhaar)
- Use this form if your Aadhaar and bank details are not linked to your UAN.
- The form must be filled out and submitted with your employer's attestation to the respective EPFO office.
Note: For partial withdrawals due to specific circumstances (e.g., medical emergencies, education, etc.), you can now self-certify the reason for withdrawal. This eliminates the need for additional certificates. For more details, refer to the EPFO order dated 20.02.2017.
Online Application
EPFO has introduced an online withdrawal facility, which simplifies the process, making it quicker and more convenient. To apply online:
- Log into the EPFO portal using your UAN.
- Select the "Claim" option from the Online Services menu.
- Follow the instructions to complete the process.
This online method reduces paperwork and the need for physical submission, providing a hassle-free way to withdraw your EPF amount.
Steps to Apply for EPF Withdrawal Online on UAN Portal
Step 1: Visit the UAN Portal
- Open the official UAN Portal.
Step 2: Log in to Your Account
- Enter your UAN (Universal Account Number) and password.
- Complete the captcha and click on the ‘Sign In’ button.
Step 3: Verify Your KYC Details
- Navigate to the ‘Manage’ tab and select ‘KYC’ to ensure your KYC details (Aadhaar, PAN, and Bank details) are verified.
- If the details are not verified, you will need to update them.
Step 4: Access the Claims Section
- Once KYC is verified, go to the ‘Online Services’ tab and select ‘Claim (Form 31, 19, 10C & 10D)’ from the dropdown menu.
Step 5: Confirm Member and KYC Details
- Review your member details, KYC information, and other service details.
- Enter your bank account number and click ‘Verify’ to confirm.
Step 6: Agree to the Undertaking
- Click ‘Yes’ to sign the certificate of undertaking, which confirms your intention to proceed with the withdrawal.
Step 7: Proceed with Online Claim
- Click on ‘Proceed for Online Claim’ to initiate the withdrawal process.
Step 8: Choose Your Claim Type
-
In the claim form, select the type of claim you wish to make:
- Full EPF Settlement
- Partial EPF Withdrawal (Loan/Advance)
- Pension Withdrawal
- If you’re not eligible for any of these options due to the service criteria, they will not appear in the dropdown menu.
Step 9: Fill in the Claim Details
- For PF Advance (Form 31), select this option to withdraw your funds.
- Provide the purpose for the advance, the amount required, and your address.
Step 10: Submit Your Claim Application
- Tick the certificate box to agree to the terms.
- Submit your application and upload any scanned documents required for verification, as per the purpose mentioned in the form.
How to Check PF Withdrawal Status?
- Step 1: Log in to the UAN portal
- Step 2: Click on the 'Online Services' tab and click on the 'Track Claim Status' option.
- Step 3: Enter the reference number.
- Step 4: The status will be displayed on the screen.
Documents Required for EPF Withdrawal
- Universal Account Number (UAN)
- Bank account information of the EPF subscriber
- Identity and address proof
- Cancelled cheque with IFSC code and account number
PF Customer Care Numbers
PF toll-free number – 14470
PF missed call number for getting to know EPF details – 9966044425
PF balance enquiry number – SMS “EPFOHO UAN” to 7738299899
PF email – [email protected]
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