The EPF or the Employees’ Provident Fund is the most popular investment for salaried individuals and is maintained solely by the Employees’ Provident Fund Organisation of India (EPFO). As a rule, any company having more than 20 employees has to register with the EPFO. On 10th of February this year, Ministry of Labour issued a gazette notification about the changes in EPF act secretly. However, it did not issue any press release. Even one can’t find this notification in the labour ministry or EPFO portal. Apparently, the same is available among all other central government notification published on that date.
Despite such silent notification, there have been big changes in EPF withdrawal rules. The changes are as such:
- Retirement Age has been increased – Till now the minimum retirement age for EPF was 55 years. But, now the ‘full’ EPF balance will not be paid before one attains the age of 58 years.
- PF can’t be withdrawn before the age of 57 during the job – Till now you can get the 90% of the EPF corpus one year before the retirement. But, now you should be at least 57 years old.
- 100% EPF withdrawal is not possible before the retirement
- EPF membership does not end with leaving the job – The membership would continue up to the retirement age. The EPF membership has become independent of the job.
The EPF scheme was designed keeping in mind the private sector employees who do not give due thought to their retirement days. It is particularly very beneficial to those who don’t get any pension. In the present scenario, the job switch has become very common and people withdraw their full PF amount very often with every job switch. The Employees Provident Fund has become the retirement saving in the true sense. It would surely be good news in the long run. Hence, to make EPF more fruitful, the EPFO has come with stringent EPF withdrawal rules. The purpose of the new rule is to make EPF withdrawal difficult so that it will be beneficial when you are actually in need of this amount.
Often parents have the mentality to get their child married till they are serving in the organization and to utilize the EPF amount. As per the new rules, you cannot withdraw the 100% EPF amount before the retirement. Additionally, you would not be able to use the EPF corpus for your business or for any other more beneficiary scheme. The retirement saving would remain stuck to EPF whereas you can earn a better return by investing in the mutual funds.
Many people launched an online campaign against the decision, which was to be implemented from February 10 but was later put on hold until April 30. The violent protest took place in Bangalore where protesters pelted stones at Hebbagodi Police Station and torched seized vehicles parked there, as the spontaneous agitation with no trade union leading it spun out of control.
At least two Karnataka State Road Transport Corporation buses and one of Bengaluru Metropolitan Transport Corporation have been set on fire. Incidents of stone-pelting on buses and other vehicles were reported from different parts of the city such as Bannerghatta and Jalahalli cross, as also near the Electronics City, the hub of IT firms.
Facing protests in several parts of the country, the government kept in abeyance for three more months the proposed move to bar withdrawal of employers’ contribution to the provident fund corpus until an employee attains the age of 58.
The new rules have made the EPF withdrawal difficult. The purpose of EPF is your retirement. Many withdrew their EPF before retirement, unable to gain from the power of compounding and defeating the purpose of EPF. These new rules force you to accumulate at least your Employer’s contributions till you attain the retirement age. However, the withdrawals from the EPF within five years of joining are still taxable.
From now onwards, there would be several EPF account without contribution as people would not be able to withdraw their full EPF corpus. The bigger question arises will such account earn any interest after 3 years?