EPF Advance- Should you withdraw from your PF account?

Retirement fund body Employees’ Provident Fund Organisation (EPFO) has allowed its members to avail the second Covid-19 advance given the second wave of coronavirus in the country. EPFO has allowed its subscribers to withdraw non-refundable advances in certain cases like illness and buying a house, among others. Now, individuals can withdraw money from their PF account, citing COVID-19 pandemic as a reason.

Here is all you need to know about EPF and how you can claim this advance.

What is an Employee Provident Fund (EPF)?

Introduced under the Employee’s Provident Fund and Miscellaneous Act, 1952, the saving scheme can be referred to as the collection of funds by the employee and the employer at regular intervals for the benefit of the employee’s post-retirement needs. Any company with 20+ employees must comply with the EPF schemes of the government.

Features of EPF

1] Under the EPF scheme, both the employee and the employer submit 12% of the employee’s basic and dearness allowance to the employee’s PF account, every month.

2] While the employee contributes a total of 12% to her EPF account, the employer contributes 8.33% towards the employee’s EPS (Employee Pension Scheme) and the remaining 3.67% towards EPF.

3] It must be noted that throughout the lifetime of an employee, she must have only one PF account. Upon changing of jobs, the employee must transfer her PF account from the previous employer to her current one.

Benefits of EPF:

1] The Employee Provident Fund Office (EPFO) offers a fixed level of interest on the amount in the EPF account of an employee. The current interest on EPF is 8.50%.

2] The amount of interest to be received on the EPF amount, along with the principal amount collected is entirely tax-free.

3] Additionally, in case of the unfortunate death of the account holder, the accrued amount can also be withdrawn by her nominee or legal heir.

4] You can easily track your EPF balance, and access your EPF account on the government-backed EPF portal www.epfindia.gov.in using the UAN provided by your employer.

When was this advance first announced?

The provision to withdraw money from EPF accounts was first announced in March 2020 under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) to provide financial security to workers affected due to the Covid-19 pandemic

Eligibility to apply for withdrawal: 

One should satisfy these three conditions to apply for a claim:

a) Universal Account Number (UAN) of the EPF member must be activated

b) Aadhaar number should be verified and linked with UAN

c) Bank account of the EPF member with correct IFSC should be seeded with UAN.

Members who have already availed the first advance can also use this option.

How much can a person withdraw? 

Lesser of the two will be given

a) An amount equivalent to three months of wages(Basic + DA), OR

b) 75% of the amount available in their EPF Account

How can we apply for this claim online?

Here is a step by step guide for online PF withdrawal claim:

1] Log in at your EPFO account using the given UAN and its password

2] Go to the ‘Online Services’ tab and select ‘Claim (Form-31, 19, and 10C) option

3] Your PF/EPF account details will appear on the screen. Enter the last four digits of your bank account number and click on the ‘verify’ button

4] Confirm Terms & Conditions

5] Click on ‘Proceed Claim Online’ button

6] Select “PF Advance (Form 31)’ and specify the reason for PF withdrawal. The reason for an advance can be indicated as an Outbreak of pandemic (COVID-19). 7] Enter the amount required and fill in your complete address

8] Fill in your bank account details and upload a bank account cheque

9] Click on ‘Send OTP’ option

10] After receiving the OTP, enter OTP

11] Your PF claim online will get registered once you submit OTP

Note that your online PF withdrawal claim requires authentication from your employer. The withdrawal amount will be transferred to the given bank account after the authentication by the employer.  

How can we apply for this claim offline?

To withdraw EPF through offline mode, you need to submit a physical application for its withdrawal. Steps for withdrawing EPF through offline mode are:

1] Download the new composite claim form (Aadhaar) or composite claim form (Non-Aadhaar) from the EPFO website. You can go directly to this link to download the form: https://www.epfindia.gov.in/site_en/index.php

2] Fill in the new composite claim form (Aadhaar) and submit it to their respective EPFO office. The attestation of the employer is not needed.

3] The same process has to be followed while filling new composite claim form (Non-Aadhaar). Here, the form has to be submitted after the attestation of the employer.

How to check the claim status?

Visit the Member e-Seva portal, log in to your account, and then under the online services tab, click on ‘Track Claim Status’

Claim Settlement Process:

The EPFO will also settle COVID-19 claims within three days. For this, EPFO has deployed a system-driven auto-claim settlement process in respect of all such members whose KYC requirements are complete in all respects. 

Should we withdraw money from EPF?

You must remember that EPF earns you a higher interest rate in comparison to bank FDs or small savings instruments, and in 2020-21 the interest rate offered to members was 8.5%. This is post-tax interest income and is equivalent to pre-tax interest income of around 12.5% for someone in the highest tax bracket of 30%.

Usually, this would be enough reason for you to leave the EPF corpus untouched until your retirement unless it is for meeting critical goals such as home purchase, children’s education, or your wedding. However, the last 15 months have been financially very challenging for many of us.

If on the one hand, people have seen disruptions in income, many have suffered huge medical expenses and, in some cases, have lost their near ones. These circumstances have not only dried individual savings in a lot of cases but have potentially forced many people to go for either a personal loan or other expensive sources of borrowing.

In such circumstances, you should not hesitate to withdraw from your EPF account. It is better to do that rather than go for additional borrowing and pile on debt at a time when you are already facing disruptions in income and struggling to pay your existing debts.