Decoded: What’s Provident Fund and when are you able to withdraw cash from it?



An workers’ provident fund is a government-managed retirement financial savings scheme for workers.


Each month, workers contribute part of their wage in direction of provident fund. The purpose is to obtain lump sum funds with curiosity on the time of retirement from employment.





In India, the Staff’ Provident Fund Organisation, or EPFO, is chargeable for the regulation and administration of provident funds.


Now, who’s eligible for provident fund?


Legally, any worker who has a month-to-month wage of as much as Rs 15,000 is eligible. However most Indian corporations provide it to all workers as a part of their wage package deal. You probably have a better wage, you’ll be able to decide out of it at the start of your profession, in case your employer so permits. When you go for EPF, you can not decide out of it through the time of your employment at that office.


Now, let’s discuss concerning the contribution.


The obligatory contribution is 12 per cent of an worker’s primary wage, credited to the worker’s account on the finish of each month. The employer often contributes an identical quantity. Of the latter contribution, 3.7 per cent goes in direction of the provident fund element and the remaining 8.33 per cent in direction of pension fund.


Your employer opens the PF account for you. It’s potential so that you can function it on-line with a Common Account Quantity, or UAN. You may verify your account stability and switch your account whereas altering jobs. The UAN supplied by EPFO is principally used for monitoring PF stability and PF declare standing.


The pooled funds usually earn curiosity at a charge determined by the federal government. In March 2020, the EPFO lowered the rate of interest on workers’ provident fund to eight.50% for 2019-20 from 8.65% earlier. For the monetary yr of 2020-21, the rate of interest was retained at 8.50%.


There are two methods by which you’ll withdraw your provident fund.


The primary is whenever you attain the retirement age of 58 years. On this means, you apply for withdrawal of your provident fund by means of your employer and get your full PF corpus. Additionally, when you have been out of labor for 2 months or extra, you’ll be able to apply and withdraw your full PF corpus after tax deduction.


One other means is to withdraw a part of your corpus earlier than retirement age in case of main life occasions like your marriage or your youngster’s marriage, or for training, buy a home, or medical emergency. The portion the corpus you could withdraw is totally different in case of every of those occasions. Particulars of those can be found on the web site of the EPFO.


Finance Minister Nirmala Sitharaman had introduced in her Union Price range for 2021-22 that curiosity earned on workers’ annual contribution past Rs 2.5 lakh to their PF could be taxed. Taking this announcement ahead, the Central Board of Direct Taxes notified the principles for these on August thirty first. The edge is increased, at Rs 5 lakh, for circumstances the place solely workers contribute to the PF, not the employer.


Each EPF subscriber’s account could have two parts — taxable and non-taxable. Curiosity earned can be individually calculated on each accounts from FY21-22. These new guidelines come into impact from April 1, 2022. So, contributions made until March 31, 2021, can be thought of non-taxable.


You may maintain your self concerning the new guidelines relating to provident fund by often checking the EPFO web site.

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