More reports on: Government policies

EPFO plans cap on PF withdrawals to check erosion of corpus

news
07 July 2015

The Employees' Provident Fund Organisation (EPFO) is planning to limit PF withdrawals to 75 per cent to check, what it calls, ''misutilisation'' of the fund and ensure the corpus is not eroded.

The EPFO may further reduce the withdrawal limit in case of any excessive erosion in the corpus. Sources say the limit may be further reduced to 50 per cent in the future with limits on the number of withdrawals as well.

Under the existing provisions, Employees Provident Fund Organisation (EPFO) subscribers can withdraw the entire amount in their credit by showing they have not been employed anywhere for two months.

Subscribers can also withdraw 100 per cent of their provident fund for higher education, construction of a house and marriage among other purposes.

Nearly half of the 13 million PF claims that the EPFO handles every year are for 100 per cent withdrawals.

At present, there are no limits on the number of withdrawals also.

''The existing regulations allow full withdrawal for various provisions, and we feel this has been misutilised by employees who treat PF account as a savings bank account. The new regulation will stop the misutilisation and the PF money will be used as old-age security,'' EPFO commissioner KK Jalan said.

EPFO plans to soon notify limits on withdrawals - capping it at 75 per cent – in a few days.

The proposal regarding changes in 'The Employees' Provident Fund Scheme' has been sent to the labour ministry for approval.

''We will take a decision in this regard in the next 10-15 days,'' labour secretary Shankar Aggarwal said.

Central Provident Fund Commissioner K K Jalan also said the proposed changes are likely to be notified in the next 10-15 days, as it has got the backing of employee unions.

It is also argued that the limit on withdrawals will also ensure availability of funds in the subscriber's account and thereby help maintain continuity of the Universal Account Number (UAN) which is provided to each PF subscriber.

UAN enables employees to maintain a single PF account while switching jobs.

''A minimum of 25 per cent PF money in the account will ensure the UAN facility remains active even when an employee switches jobs,'' said Jalan. 

To discourage premature withdrawals, the EPFO had in May introduced TDS deduction on withdrawals from accounts with over Rs30,000, where the subscriber has been service for less than five years.

The government is looking to cap premature provident fund withdrawals at 75 per cent for EPFO subscribers at any given time till the age of 58.

Under the existing provisions, Employees Provident Fund Organisation (EPFO) subscribers can withdraw the entire amount by showing their "not employed anywhere for two months" status.

Jalan also said the proposed changes are likely to be notified in the next 10-15 days, as it has received the backing of employee unions.

Asked whether the 75-per cent withdrawal ceiling has been proposed for even circumstances like constructing a house, marriage, children's education, etc, Jalan replied in the affirmative.

The idea behind the proposal, he said, is to ensure that provident fund is used as an old-age security and not misused for purposes other than it was meant to be.

The provident fund money, he said, should be used as an old-age security scheme and not like a savings bank account.





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