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Most people are looking to redeem their funds locked away in investments. Owing to the current scenario, the government too is realising the need to introduce certain relaxations on rules and regulations binding the redemption of funds parked in specific investment avenues.One of the most popular savings schemes amongst employees in India is the Employee’s Provident Fund (EPF) . This scheme helps employees save a corpus for their post-retirement life. This article shall you with all necessary details about PPF withdrawal amid the COVID-19 crisis.Read also : What is Employee Provident Fund (EPF)?
How Much Can You Withdraw?
All EPF account-holders can withdraw up to an amount which is lower of -
- Three months’ salary (here, salary = basic pay + dearness allowance) or
- 75% of total EPF balance in your account
For example, if an employee’s monthly salary (basic pay and dearness allowance) is Rs. 50,000 and his EPF account holds Rs. 4 lakh, then you shall be eligible to withdraw:
- Three months’ salary = 50,000 x 3 = Rs. 1.5 lakh or
- 75% of total EPF balance held at the time = 75% x 4,00,000 = Rs. 3 lakh
whichever is lowerTherefore, in this case, the employee shall be eligible to withdraw funds from his EPF account up to Rs. 1.5 lakh. This means that the employee can withdraw a maximum of Rs. 1.5 lakh and also place a withdrawal request for an amount lower than 1.5 lakh.It is important to note here that a request for EPF advance due to the COVID-19 situation can be made only once.
When can you withdraw your EPF?
- A person can withdraw the PF balance when he/she retires.
- Another case is when a person is unemployed for over two months. In such a case, the individual would need an attested copy of the unemployment letter from a gazetted officer.
- However, a person can partially withdraw the amount in situations such as marriage, medical expenses, home loan repayment or education expenses.
Tax Relief
With job losses and pay-cuts becoming commonplace events, employees are being forced to dip into their savings in order to make ends meet. Considering the financial burden that Indian employees are facing due to the pandemic, the Indian Government introduced a special provision governing withdrawal of funds from EPF Account on the 20th of March, 2020.The general income tax rules regarding the withdrawal of money from an EPF account state that funds withdrawn from an EPF account before the completion of 5 years of continuous service must be charged to tax in the year of the withdrawal.However, in case you decide to withdraw funds from EPF account due to the COVID-19 pandemic, such withdrawal will be exempt from tax.
In Conclusion
Apart from the aforementioned guidelines, EPF account-holders must remember that the application for COVID-19 withdrawal claim can be made online as well through the EPFO portal.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.