Keen to protect the retirement savings of workers, the government has finalised a proposal to cap premature withdrawals from the Employees’ Provident Fund at 75 per cent of the total accumulation in case of loss of employment. The move would also entitle a PF subscriber to retain his or her Unique Account Number while changing jobs.
At present, EPF subscribers can withdraw their entire savings by showing that they have not been employed for two months and can open a new account on moving to a new job.
The EPFO also plans to raise the age for withdrawal of up to 90 per cent of the accumulation from the current limit of 54 years to 57 years. Additionally, members would be allowed to retain a part of the EPF and the related Employees’ Pension Scheme (EPS) until the age of 58 years from the current provision of 55 years.
“It has been observed that members of the Fund withdraw the full amount from their PF accounts while switching jobs and the trend needs to be checked so that members have sufficient accumulations at the time of their retirement,” said a note prepared by the labour ministry.
The changes would be brought about through amendments to the EPF Scheme, 1952 in paragraph 68H(2) and paragraph 69, it added.
A new paragraph 68NNNN shall be inserted for option for withdrawal on cessation of employment that would allow the worker to withdraw only his PF contribution including interest from his PF fund account.
Under the EPF scheme, 12 per cent of workers’ basic wages and a matching contribution of 12 per cent by employers are deducted as PF contribution every month. 8.33 per cent of the employer’s contribution is then diverted into the EPS.
The cap on premature withdrawals by members would also be applicable in case of illness, marriage or higher education of a child and building of a house. However, the requirement of the two month waiting period for premature withdrawal would not apply to women workers who leave their job for marriage. The labour ministry has also called for a meeting with employer representatives and labour leaders who are members of the EPFO’s Central Board of Trustees on July 24 to discuss the proposal.
Sources said that a notification will be issued by the labour ministry to implement the changes in the EPF Scheme.
According to Central provident fund commissioner KK Jalan, out of the 1.3 crore annual claims, about 65 lakh claims are for full withdrawal. “If the proposal is implemented by the Centre, the total number of claims would come down to 50 lakh,” he had said recently. As a deterrent for premature PF withdrawals, the Finance Act, 2015 has levied from June 1 tax deducted at source between 10 per cent and 34.608 per cent on such withdrawals exceeding Rs 30,000 before completion of five years of service.