EPFO To Allow Instant PF Withdrawals: What To Consider Before Making The Move

The Employees’ Provident Fund Organisation (EPFO) is planning to introduce a more convenient way for subscribers to take out their funds by allowing instant withdrawals through ATMs. This revamped method is expected to be rolled out by the end of May. If implemented, it will significantly ease the process for PF account holders, making the withdrawal process faster. It will also eliminate the need for lengthy paperwork or visits to the EPFO office.

Provident Fund is a mandatory savings scheme for employees in the organised sector in India. A certain portion of the monthly salary of employees goes towards their PF, and a similar contribution is matched by their employer. The standard contribution rate is 12% of the basic salary for both the employee and the employer. While PF comes with an annual interest rate of 8.25% and is seen as a retirement fund, there are rules that also allow for partial withdrawal of funds. This move is aimed at ensuring that the employees have access to their funds in case of emergencies or unexpected expenses.

At present, about 7.5 crore active members maintain their PF accounts. Sumita Dawra, Secretary at the Ministry of Labour and Employment, told news agency ANI that the move will help millions of PF subscribers. The employees will be able to withdraw up to Rs 1 lakh instantly. Just like bank balances, they will also be able to check their PF balance on Unified Payment Interface (UPI) apps available on their mobiles, she added.

While the new features may seem convenient, it is important to remember that PF is generally seen as a long-term savings or emergency fund.

Before making withdrawals, employees should carefully consider the following factors:

Purpose and impact on retirement funds: With more convenience, PF subscribers can easily withdraw their funds in just a few steps. It is important to consider if the decision would impact one’s long-term financial goals. The government offers considerable returns on PF contributions, which can help in accumulating a small retirement or emergency fund. So, one must consider if their purpose of withdrawing the PF aligns with their long-term goals or not.

Tax implication: Like many other schemes, PF has its own tax implications based on the amount, tenure and other factors. For instance, if an employee withdraws their PF after 5 years of service, no TDS or ‘tax deducted at source’ is levied. 

In the case of service of less than 5 years, no TDS is applicable only if the amount is below Rs 30,000. If the withdrawal amount exceeds Rs 30,000 and the employee has worked for less than 5 years, TDS will be deducted at 10% if documents are submitted along with PAN. If a PAN document is not submitted, the TDS rate increases to a higher rate.