How relaxation of EPF withdrawal rules is helpful?
As per the announcement, due to this whole pandemic situation, the government is intending to amend Employees Provident Fund withdrawal rules and is also willing to pay both the employer and employee contribution to the EPF account for the next three months.
In a press briefing, Finance Minister Nirmala Sitharaman made two major announcements pertaining to members of the Employees' Provident Fund Organisation (EPFO). As the latest announcements states, aimed to tackle the COVID-19 situation, the government will be relaxing the Employees' Provident Fund (EPF) withdrawal rules to enable easier access to money and also pay both the employer and employee contribution to the EPF accounts for a next three months. The EPFO announced to allow withdrawal of over 75 per cent of the credit recently standing in the EPF account or three months of wages, whichever is lower. The nature of withdrawal will be non-refundable from the EPF account.
The FM said that the government will be contributing both employer and employees to the EPF account for the next three months to ensure continuity of the EPF accounts, in another announcement. The applicability of these announcements will be for those establishments which have up to 100 employees and 90 per cent of those who are earning less than Rs 15,000 pm. According to the EPF rules, both the employer and employee are supposed to contribute 12 per cent of the monthly salary to the EPF account.
This proposal to permit non-refundable advance to the employees out of their Provident Fund balances will help employees to solve their liquidity issues. Currently, some specific purposes such as housing, marriage etc. are required to be permitted to obtain non-refundable advances. Under this rule, there is another underlying rule which says that these are permitted to the employee who has a minimum services period. The proposal will allow employees to withdraw up to 75% of their PF balances or 3 months wages as non-refundable advance which will enhance liquidity of employees especially who are earning wages less than Rs 15,000 per month, with full 24% contribution, while covering both employer’s and employee’s share of Provident Fund and Pension contribution, and all the expenses will be borne by the Government of India. Though, it needs to be clarified that whether this benefit will commence for contributions due for the month of March 2020 or for contributions for the month of April 2020…? Also, the air is not clear on the fact whether the employer is still required to deposit Provident Fund administrative charges payable at ‘0.5% of wages’.
Status of EPF rules currently
As the current EPF withdrawal rules suggests, an employee can withdraw money from their EPF account for the following reasons:
However, the withdrawals under these circumstances are also subject to certain terms and conditions. For example, for marriage of self, son, daughter, brother or sister, a member can withdraw a maximum of 50 per cent of the employee's share and this can be done only after seven years of minimum service. And the same set of rules and terms & conditions applies for taking advance for education of self or for the children after class 10.
In case of a job loss, an employee can withdraw a maximum of 75 per cent of the total credit after one month of unemployment and the rest of 25 per cent can be withdrawn if he/she remains unemployed extending not less than two months.
In case of any medical emergency, the minimum service criterion does not apply and as the rules states, the employees can withdraw six months of basic wages and dearness allowance or employee's share with interest, whichever is lower.
