EPFO rules restricting withdrawal of employees' provident fund will come into force after April 30. This means that in case you are unemployed for 2 months or more and want to withdraw your full EPF you can do so only within the next 15 days. After that the withdrawal amount will be restricted and you will be able to get the full amount only when you turn 58.
On Feb 10, 2016, the ministry of labour and employment made sweeping changes in the EPF rules restricting the withdrawal of EPF corpus.
Hitherto, a member of EPFO could withdraw 100% of the accumulated corpus if unemployed for a period of 2 months or more. The accumulated corpus is a sum of employer's contribution, employee's contribution and the interest earned on them. Of course, the person needs to have accumulated some EPF in a previous employment to have a corpus to withdraw at all.
However, the new EPF rules have restricted the amount of withdrawal that a member can make. Under the new rule, a member after being unemployed for 2 months or more can withdraw only his own contribution and the interest earned on it. He can't withdraw the corpus generated from the employer's contribution along with the interest earned on it. A member in the Employees Provident Fund Organisation (EPFO) can withdraw the full Employee Provident Fund (EPF) corpus only after attaining the age of 58 years. So, if you are jobless for 2 months or more and wish to withdraw the full EPF corpus, you just have 15 days to get it out.
The government has deferred the implementation of the new rule till April 30, 2016. From May 1, till 58 years of age you can withdraw only your own contribution in EPF which equals 12% of your basic salary plus the interest if unemployed for 2 months or more. The employer's contribution plus the interest accumulated will be withdrawable only once you attain the age of 58 years.
We consider a hypothetical scenario wherein a person after being employed for 20 years becomes jobless in the month of Jan, 2016. Assuming his basic salary as Rs 25000 per month for the whole period his own contribution in EPF would be Rs 3000 per month. If he contributes for 20 years, his own contribution of Rs 7.20 lakh (12%*25000*12*20) will yield him a corpus of approximately Rs 19 lakh which includes the interest on his contribution. What's more, the employer's contribution of Rs 4.20 lakh will grow to Rs 11.50 lakh approximately which includes the interest component too. In this case, we have assumed an interest rate of 9% per annum compounded yearly for the whole period. As he became jobless in Jan, he is unemployed for a period of more than 2 months as on date.
Under the current rule, if he withdraws his EPF corpus before May 1, then he can withdraw the full corpus of Rs 30.5 lakh. However, if he doesn't withdraw before May 1, he can take out his own contribution and interest of Rs 19 lakh even after this date provided he remains jobless. However, the remaining Rs 11.50 lakh can be withdrawn only after he reaches the age of 58 years. You can however, withdraw 90% of the employer's contribution plus interest at the age of 57 years. Importantly, the erstwhile rule of zero interest on inoperative accounts was quashed from April 1. Hence the employer's contribution lying idle in the EPF account till the age of 58 years will continue to earn interest.
Therefore, if you are jobless for 2 months or more and have liquidity concerns, try to settle the EPF account before May 1. If you withdraw you can get the full accumulated EPF corpus (includes your own contribution, employer's contribution and the interest earned) which will assist you in tiding over problems faced due to unemployment in a better way.
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