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There is often confusion among employees about withdrawing Provident Fund (EPF) money after changing jobs or leaving the job. According to the rules of Employees Provident Fund Organization (EPFO), the entire amount cannot be withdrawn immediately after leaving the job, rather the period of unemployment has been fixed for this. When an employee leaves the job and does not join a new job, he is allowed to withdraw funds in two phases. In the first phase, if the employee remains unemployed for one continuous month (30 days), he can withdraw a maximum of 75 percent of his total PF balance as advance. The purpose of this rule is that in case of emergency, the employee gets immediate financial assistance and his PF account is also not completely closed. The remaining 25 percent remains deposited in the balance account, on which the annual interest declared by EPFO continues to be received. If the period of unemployment completes two consecutive months (60 days), the employee can also withdraw the remaining 25 percent amount, i.e. then the full and final settlement of the entire 100 percent fund is done.
If you have funds of ₹1 lakh, ₹3 lakh or ₹5 lakh deposited in your EPF account (Employee Share + Company Share + Earned Interest), then the mathematics of the amount to be received after 1 month and 2 months of unemployment will be as follows. Suppose a total of ₹ 1,00,000 is deposited in the account of an employee. After 1 month of unemployment, he can withdraw ₹75,000 under the 75 percent rule, while ₹25,000 will remain safe in the account. After completion of 2 months, he will be able to withdraw the remaining ₹25,000. Similarly, if the total balance is ₹ 3,00,000, then after 1 month it will be possible to withdraw ₹ 2,25,000 at the rate of 75 percent and ₹ 75,000 will remain, which can be withdrawn after 2 months. Whereas if there is a fund of ₹ 5,00,000, ₹ 3,75,000 can be withdrawn immediately after 1 month and ₹ 1,25,000 will remain in the account, which will be available in full settlement after completion of 60 days.
Employees’ PF has two main parts—first EPF (Provident Fund) and second EPS (Employees’ Pension Scheme). Out of the company’s 12 percent contribution, 8.33 percent goes to the pension fund. The rules for withdrawing pension money are completely different from PF withdrawal. If the total service tenure of the employee is less than 10 years, then he can withdraw the pension money in lump sum after leaving the job. For this, Table D of EPFO is applicable, in which pension amount is paid from a prescribed formula based on years of service and last salary. If the total employment of the employee has been for 10 years or more, then according to the rules, the pension money cannot be withdrawn in lump sum under any circumstances. In such a situation, the employee is issued a ‘Scheme Certificate’ and on completion of 58 years of age, he gets the benefit of lifelong monthly pension (EPS-95).
While withdrawing PF money, it is very important to understand the rules of Income Tax and TDS so that there is no unnecessary reduction in the amount in hand. If an employee has completed 5 years or more of continuous service, then the entire withdrawal of PF and interest is completely tax-free and no TDS is deducted on it. If the tenure done in different companies has been transferred through UAN, then that is also added to the total service. If total service is less than 5 years and withdrawal amount is more than ₹50,000, 10 per cent TDS is deducted in case of PAN card linking. If PAN card is not updated in the PF account, then heavy TDS up to the maximum rate i.e. 34.6 percent can be deducted. However, if the employee’s total annual income in that financial year is less than the taxable limit, he can submit Form 15G (Form 15H for senior citizens) online to get exemption from TDS.
The entire process of PF withdrawal after leaving the job is now completely digital on the Unified Member Portal of EPFO. First of all, it is important to ensure that the date of leaving the job i.e. ‘Date of Exit’ has been entered by the previous company on the portal. The employee himself can enter his exit date by going to the ‘Manage’ section of the portal and using the ‘Mark Exit’ option. After this, go to the ‘Online Services’ tab and click on ‘Claim (Form-31, 19, 10C & 10D)’. After verification by entering the last 4 digits of the bank account, the claim form has to be selected. Form 31 (Non-refundable Advance) is chosen to withdraw 75% advance on 1 month of unemployment. After 2 months, it is mandatory to fill Form 19 (Only PF Withdrawal) to withdraw the entire PF and if there is less than 10 years of service, it is mandatory to fill Form 10C (Only Pension Withdrawal) to withdraw the pension. After entering all the details, the claim is submitted by entering the OTP received on the mobile number linked to Aadhaar and the amount is credited directly to the bank account usually within 7 to 15 working days.