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Last week, the Central Board of Trustees (CBT) of the Employee Provident Fund Organisation (EPFO)—the statutory body established by the Union government to govern the social security agency—released a set of new guidelines that overhauls how and when members can withdraw their accumulated corpuses.
The move, aimed at simplifying numerous complex withdrawal conditions in force earlier, ended up sending many subscribers into a tailspin.
At the heart of the outrage were new provisions that extend the time that a person has to wait after losing or leaving a job before being able to withdraw their full provident fund and pension corpuses.
Earlier, subscribers could withdraw their full PF and pension balances just two months after losing or leaving a job. From 13 October, when the new rules took effect, that wait time has become 12 months for PF. And even longer for pensions under the Employee Pension Scheme (EPS)—36 months, or a full three years.
Put like that, no wonder many EPFO subscribers caught a case of the rages.
Imagine being told you will have to wait a year or more to access your full PF or pension corpus after being laid off.
But, as it can often turn out, the devil is in the details.
And in this case, that detail is the word “full”.
More pros than cons?
As the government hastened to clarify after public opposition started building to the new rules, the new lock-in periods for withdrawals only apply to 25% of a subscriber’s PF balance. The rest of the 75% can be withdrawn immediately after the loss of employment. So while a full withdrawal will take longer (two months earlier versus one year under the new rules), 75% can be withdrawn with no wait time, unlike the one-month lock-in period in effect before.
Also, for partial withdrawals:
Prior to the simplification of norms, the member was allowed to withdraw only the employee contribution and interest ranging from 50-100%. Now, the withdrawable amount will also include employer contribution besides employee contribution and interest. As a result, 75% of the eligible amount that can now be withdrawn will be much higher than the amount he/she could withdraw under the previous provisions.
Government of India clarification on new PF norms
In fact, the new provisions make several other aspects of withdrawal easier and less onerous.
Currently, there are around 13 separate reasons one can make a premature withdrawal from the PF corpus—such as education, marriages, investing in a home, etc—with different rules and conditions to be met for each. The new guidelines consolidate these categories into just three: essential needs, housing needs, and special circumstances.