Have you ever thought of when and how you can use your savings pool lying in your PF account? So, let’s understand the circumstances under which PF balances can be withdrawn.First and foremost, one must bear in mind that PF is a retirement benefit and hence, the case of withdrawal is not very flexible if you are still working. Generally, the accumulated balance in the fund can be withdrawn only on retirement from service after attaining 55 years of age or on account of permanent and total incapacity for work due to bodily/mental infirmity. You also have an option of withdrawing 90% of the PF balance at any time after attainment of 54 years or within one year before actual retirement, whichever is later.
On the other hand, non-refundable advance can be availed for the purpose of your children’s higher education and marriage. Withdrawal is also allowed for medical treatment of self or family, or for repaying home loan, construction of house or purchase of flat, etc. This option does have its own caveat and you can avail the non-refundable advance only after you complete the prescribed period of PF membership. Premature PF withdrawal is also an option for domestic employees. This could be availed upon cessation of employment provided the employees are not re-employed for a continuous period of two months. Women members do not have to go through this waiting period and can withdraw the balances immediately upon cessation from employment for the purpose of marriage or on account of pregnancy or child birth.
On the tax front, withdrawal of PF accumulations after rendering five years of continuous service may not have tax implications. In other cases tax aspects have to be examined in line with Rule 9 of the Fourth Schedule to the Income tax Act, 1961. With the advent of ‘One employee-One PF account’, an Universal Account Number (UAN) is being allotted to employees to link their PF accounts with different establishments. It also facilitates transfer of funds and submit online request for withdrawals directly to the PF office without attestation by their employers, provided UAN is activated with Aadhaar number and bank account details. As per the recent notification, UAN is mandatory for the PF withdrawal if the date of leaving is after January 01, 2014.
The provisions for withdrawal for International Workers (IWs) are quite different. In 2008, the government extended applicability of PF provisions to IWs. An IW can withdraw PF only on retirement after attaining 58 years of age. However, in case of IWs from countries with which India has an effective social security agreement (SSA) and who have contributed to Indian PF, the accumulations can be withdrawn at the time of repatriation from India.
Though the various measures are moving towards making the entire process hassle-free mechanism, it may be a prudent deal to hold the balance till retirement in view of the lucrative interest rates in PF vis-à-vis the rates of interest on other available savings mechanisms. Besides, PF, in its true sense, can serve as a post-retirement financial pedestal to a salaried employee who stashed portions of his earnings throughout his working life.
(The writer is partner, Deloitte Haskins & Sells LLP. Inputs from Sai Srujana Buduma, assistant manager, Deloitte Haskins & Sells LLP)