Government plans to cap premature withdrawal of PF money at 75% of total amount
The change, once implemented, will impact:
1. Working people who tend to withdraw PF money between jobs or
2. Those planning to use it for either buying a house or
3. For paying medical bills or for children's higher education or weddings.
The proposal, which is seen as a reverse move happening for the first time in the history of the EPFO, is pending with labour ministry and once approved it could be implemented by a simple executive order outlining changes in the EPF scheme.
Read more at:
Government plans to cap premature withdrawal of PF money at 75% of total amount - The Economic Times
From India, Thana
59The change, once implemented, will impact:
1. Working people who tend to withdraw PF money between jobs or
2. Those planning to use it for either buying a house or
3. For paying medical bills or for children's higher education or weddings.
The proposal, which is seen as a reverse move happening for the first time in the history of the EPFO, is pending with labour ministry and once approved it could be implemented by a simple executive order outlining changes in the EPF scheme.
Read more at:
Government plans to cap premature withdrawal of PF money at 75% of total amount - The Economic Times
From India, Thana
New Delhi: Soon, employees will not be able to withdraw more than 75% of their accumulated provident fund (PF) before reaching the retirement age of 58, with the Employees’ Provident Fund Organisation (EPFO) moving to issue an executive order in this connection.
The move is aimed at discouraging PF withdrawal and boosting post-retirement social security benefits of workers. Central PF commissioner K.K. Jalan on Monday said EPFO has already sent a proposal in this regard to the labour ministry, which is looking at it favourably.
“We have to create an incentive for keeping PF money till retirement and not withdraw it in between. We have proposed the 75% cap to the labour ministry, which is expected to approve it in next 15 days,” said Jalan.
Labour secretary Shankar Aggarwal said the ministry is looking at it and believes that 100% withdrawal of PF money during service is detrimental to the concept of PF. “Soon we will approve the proposal. It can be done by the ministry and does not require parliamentary approval,” he said.
Currently, employees can withdraw 100% of their PF money while switching jobs or taking a break between jobs. Existing PF subscribers can withdraw their corpus by citing reasons such as house construction, marriage or education of children. “We have to realize that EPF is not a savings bank account. It is a retirement saving and meant for social security post-retirement,” said Jalan
A labour ministry official, requesting anonymity, said that EPFO would like to eventually bring down the cap to 50% of the PF deposited.
Tax deduction at source on premature withdrawals—within five years of contribution—announced earlier this year is a step in that direction, he said.
“The effort is to motivate people and put in place legal provisions for a better social security corpus in old age,” said Jalan.
Every year, nearly 13 million applications are received for withdrawal of PF money, of which more than 50% are for 100% withdrawal, the PF commissioner said. Once the labour ministry approves the EPFO proposal, this number is expected to fall to 5 million.
Jalan explained that other than better social security, the measure will allow the Universal Account Number (UAN) to continue despite switching jobs.
“A 100% withdrawal means severance of ties with EPFO and UAN. If an employee is getting a permanent number, it should stay with him or her throughout (service),” Jalan said, adding that fewer withdrawals translate into a bigger corpus for EPFO and better bargaining power for investing in different investment vehicles.
Aggarwal said the labour ministry is looking to make EPFO a “centre of excellence” going forward and for this, it is adopting a lot of technology. In the past two years, EPFO has undergone major changes and more are in the offing, he said, and added: “A 100% paperless and 100% transparent set-up is what EPFO is aspiring for.”
EPFO has an active subscriber base of over 45 million and it directly manages a corpus of more than Rs.6 trillion. Additionally, more than Rs.2 trillion is managed by exempted establishments or organizations that manage their own PF money under EPFO’s overarching guidance.
Jalan said EPFO’s central board, comprising government, employees’ and employers’ representatives, is in favour of a cap.
“Labour unions will support any move that helps workers, but EPFO has to make sure it does it without violating the rights of workers. EPFO also needs to make clear how the system will work in the situation that the National Pension System is made an alternative to PF,” said D.L. Sachdeva, national secretary of the All India Trade Union Congress, a trade union.
From India, Hyderabad
The move is aimed at discouraging PF withdrawal and boosting post-retirement social security benefits of workers. Central PF commissioner K.K. Jalan on Monday said EPFO has already sent a proposal in this regard to the labour ministry, which is looking at it favourably.
“We have to create an incentive for keeping PF money till retirement and not withdraw it in between. We have proposed the 75% cap to the labour ministry, which is expected to approve it in next 15 days,” said Jalan.
Labour secretary Shankar Aggarwal said the ministry is looking at it and believes that 100% withdrawal of PF money during service is detrimental to the concept of PF. “Soon we will approve the proposal. It can be done by the ministry and does not require parliamentary approval,” he said.
Currently, employees can withdraw 100% of their PF money while switching jobs or taking a break between jobs. Existing PF subscribers can withdraw their corpus by citing reasons such as house construction, marriage or education of children. “We have to realize that EPF is not a savings bank account. It is a retirement saving and meant for social security post-retirement,” said Jalan
A labour ministry official, requesting anonymity, said that EPFO would like to eventually bring down the cap to 50% of the PF deposited.
Tax deduction at source on premature withdrawals—within five years of contribution—announced earlier this year is a step in that direction, he said.
“The effort is to motivate people and put in place legal provisions for a better social security corpus in old age,” said Jalan.
Every year, nearly 13 million applications are received for withdrawal of PF money, of which more than 50% are for 100% withdrawal, the PF commissioner said. Once the labour ministry approves the EPFO proposal, this number is expected to fall to 5 million.
Jalan explained that other than better social security, the measure will allow the Universal Account Number (UAN) to continue despite switching jobs.
“A 100% withdrawal means severance of ties with EPFO and UAN. If an employee is getting a permanent number, it should stay with him or her throughout (service),” Jalan said, adding that fewer withdrawals translate into a bigger corpus for EPFO and better bargaining power for investing in different investment vehicles.
Aggarwal said the labour ministry is looking to make EPFO a “centre of excellence” going forward and for this, it is adopting a lot of technology. In the past two years, EPFO has undergone major changes and more are in the offing, he said, and added: “A 100% paperless and 100% transparent set-up is what EPFO is aspiring for.”
EPFO has an active subscriber base of over 45 million and it directly manages a corpus of more than Rs.6 trillion. Additionally, more than Rs.2 trillion is managed by exempted establishments or organizations that manage their own PF money under EPFO’s overarching guidance.
Jalan said EPFO’s central board, comprising government, employees’ and employers’ representatives, is in favour of a cap.
“Labour unions will support any move that helps workers, but EPFO has to make sure it does it without violating the rights of workers. EPFO also needs to make clear how the system will work in the situation that the National Pension System is made an alternative to PF,” said D.L. Sachdeva, national secretary of the All India Trade Union Congress, a trade union.
From India, Hyderabad
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Early PF withdrawal wont be easy.pdf