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Govt proposes to relax EPF withdrawal rules

As per the announcement, due to pandemic situation, the government will amend Employees Provident Fund withdrawal rules and also, will pay both employer and employee contrition to the EPF account for the continuity of the account for the next three months.

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Last Updated: Mar 30, 2020, 09.40 AM IST
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Finance Minister Nirmala Sitharaman in a press briefing made two major announcements with regards to members of the Employees' Provident Fund Organisation (EPFO). As per the announcements, made in an attempt to tackle the pandemic situation, the government will relax the Employees' Provident Fund (EPF) withdrawal rules to enable easier access to the money and also pay both the employer and employee contribution to the EPF accounts of certain establishments for the continuity of the account for the next three months.

As per the announcement, the EPFO will now allow withdrawal of 75 per cent of the credit standing in the EPF account or three months of wages which ever is lower. The withdrawal from the EPF account will be non-refundable.

In another announcement, the FM said that the government will contribute both employer and employees contribution to the EPF account for the next three months to ensure continuity of the EPF accounts. This will be applicable for establishments with up to 100 employees and 90 per cent of those earning less than Rs 15,000 per month. As per the EPF rules, an employer and employee both contribute 12 per cent of the monthly salary to the EPF account.

"The proposal to permit non-refundable advance to employees out of their PF balances will help employees to tide over their liquidity issues. Currently non refundable advances are permitted only for specified purposes such as housing, marriage etc. Even these are permitted where the employee has put in a minimum services period. The FM's proposal will enable employees to withdraw up to 75% of the PF balances limited to 3 months wages as non refundable advance enhancing liquidity of employees," said Saraswathi Kasturirangan, Partner, Deloitte India.

Puneet Gupta, Director, People Advosry Services, EY India says, "The Finance Minister has announced that for establishments with less than 100 employees where 90% of such employees are earning wages less than Rs 15,000 per month, full 24% contribution, which covers both employer’s and employee’s share of Provident Fund and Pension contribution, will be borne by the Government of India. This benefit will be extended for period of 3 months. It will need to be clarified that this benefit will be start for contributions due for the month of March 2020 or for contributions for the month of April 2020. Also, it will need to be clarified on whether the employer is still required to deposit Provident Fund administrative charges payable @ 0.5% of wages."

Current EPF rules
As per current EPF withdrawal rules, an employee can prematurely withdraw money from their EPF account for these reasons: job loss, marriage, education, purchase or construction of house, medical emergency. However, these withdrawals are subject to certain terms and conditions.

For instance, as per EPFO rules, for marriage of self, son, daughter, brother or sister, an EPF member can withdraw maximum 50 per cent of the employee's share. This can be done only after seven years of service. The same rules terms and conditions apply for taking advance for education of himself or his children after class 10.

In case of job loss, an employee can withdraw 75 per cent of the total corpus after one month and balance 25 per cent if he/she remains unemployment extends more than two months.

In case of medical emergency, there is no minimum service criterion. As per the rules, six months of basic wages and dearness allowance or employee's share with interest, whichever is lower can be withdrawn by the employee.
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