What is provident fund and how to withdraw Provident Fund?

You must have heard a lot of employees and company saying that we provide PF or employees saying that this time there was cut of some salary amount for PF. PF is nothing but known as provident fund. This article will help you to get an idea what PF actually is.



In this article we would cover the followings

  1. What is Provident Fund?

  2. What are the Types of Provident Fund?

  3. Why Provident fund required?

  4. What is the employer’s contribution for PF?

  5. Tax Benefit of Provident fund?

  6. When can the PF be withdrawn?

  7. Tax deduction on early withdrawals


1. What is Provident Fund?


As mandatory, government law, for retirement reserve funds, Provident Fund asks workers to contribute a part of their investment funds every month towards their pension amount. After some time, this sum gets accumulated, towards the end of their work contract or at retirement. The Provident Fund amount is a huge sum that helps you to develop your retirement plans.


2. What are the Types of Provident Fund?


There are three distinct kinds of PFs, which are as follows:


· Statutory Provident Fund - is a sort of PF which is kept up by organizations, including local organizations, the Railways and other such bodies. Accordingly, these kind of PF’s are for the most part characterized by the government bodies.


· The Recognized Provident Fund - is the one which applies to all exclusive associations that contain in excess of 20 employees or workers. In addition, holding a PF related account with your association, you will be given a UAN or Universal Account Number. This enables you to move your PF assets starting with one organization to the next at whatever point you transfer your one job then onto the next.


· The Public Provident Fund - is characterized by the idea of venture with respect to the representative. The PPF is additionally connected with a base amount of INR 50 and a most extreme sum of Rs. 1.5 lakhs. This PF additionally accompanies a pre-decided development time of 15 years, simply after which any type of withdrawal should be possible from the record.


3. Why Provident fund required?


The savings account balance keeps on developing in many nations, however it's still once in a while be enough to give most citizens a satisfactory life in retirement.


The retirement has been additionally extended by social change. Society is yet finding the fast ascent of industrialisation, the development of residents from provincial zones to urban focuses, and changing family structures.


Therefore and that's just the beginning, governments in many nations have stepped in to give money related help to retirees. An opportunity to reserve funds such help in a manner that promptly scales payouts to the accessible and enrolls managers and laborers to help contribute the expense.

4. What is the employer’s contribution for PF?


The PF rate is 12% out of a pay (monthly salary) of Rs 15,000 that is Rs 1800 every month. In this way, both the organization and you will contribute Rs 1800 to the EPF conspire. Aside from this rate, the business needs to pay an extra measure of 0.5% towards the EDLI (Employees Deposit Linked Insurance Scheme). Through this plan, one will get some amount of sum as retirement advantage. There are managerial expenses for EPF and EDLI that must be borne by the business of 0.5%.

5. Tax Benefit of Provident fund?


Your business' commitment to the EPF account is calculated from charges . For your commitment, you can get allowance of up to Rs 1.5 lakh as indicated by Section 80C of the IT Act.

6. When can the PF be withdrawn?


· For medical purposes


1. An employee can withdraw his amount of share along with the accumulated interest during the period or Six times of his salary whichever is lower from the PF account

2. This amount can be withdraw for the purpose of the medical purpose of self, spouse, children and parents

3. There is no minimum service period is required to avail


· For repaying Home loan


1. Amount of PF can be withdrawn for the purpose of the repaying of the outstanding loan amount on house which is held in the name of self or jointly with other

2. There is a requirement that the service period of 3 years must have been completed.


· For wedding


1. An employee can withdraw 50% of his contribution along with the interest

2. There is a requirement that the service period of 7 years must have been completed.

3. An employee can withdraw the fund for his own, siblings or child’s marriage


· For renovation of reconstruction of House


1. An Employee can withdraw 12 times of his monthly salary

2. There is a requirement that the service period of 5 years must have been completed.

3. The house should be held in his/her name or held jointly with the spouse


· For purchasing or construction of house

1. If the Plot is being purchased then 24 times of monthly salary or cost of property or the total of employees and his employers share along with the interest amount (whichever is less) can be withdrawn and if the house is being purchased or constructed then 36 times of monthly salary or cost of property or the total of employees and his employers share along with the interest amount (whichever is less) can be withdrawn

2. There is a requirement that the service period of 5 years must have been completed.

3. The house should be held in his/her name or held jointly with the spouse


· Retirement


1. A person can withdraw the entire amount after attaining the age of retirement under PF Rules (i.e. 58 Years)


· Unemployment


1. From December 6, 2018, the representatives can pull back 75 percent of their EPF amount for one month and remaining 25% when he is out of work for 60 days or more. Preceding this, a representative can make such withdrawal simply subsequent to staying jobless for over 60 days.


Note:

To withdraw money, one may now utilize 'UAN based Form 19' and in the business signature if it is a necessity. This office will be accessible to each one of those whose Universal Account Number (UAN) is initiated and have the KYC subtleties like financial balance and Aadhaar number. The case can be submitted online on e-Sewa entry.

7. Tax deduction on early withdrawals


PF withdrawal is liable for Income tax if the PF withdraws before completion of 5 year of terms of services. The administration had presented Tax Deducted at Source (TDS) on PF withdrawals. No TDS is deducted if the worker withdraws PF following five years. From June 1, 2016, for TDS, PF withdrawal less than Rs 50,000 would not be liable to TDS. TDS will be at the pace of 10 percent when PAN card is submitted.

8. Process for withdrawal of Provident fund


For offline submission –


· Individuals need to fill up a ‘new composite claim form’ or a ‘composite claim form” and submit the same to the EPFO office under their jurisdiction.

· A composite claim form needs to be attested by their employer.


For online submission –


· Individuals must have a Universal account number(UAN).

· The mobile number used to activate the UAN should be available as well.

· UAN should be linked with Aadhaar. They would also need the PAN and respective bank details with its IFSC code.

· After ensuring all the prerequisites are in place, they need to login into the UAN online portal

· Individuals need to verify their KYC details and then proceed as per instructions.

9. Steps to apply for Provident fund online


1. Login with your UAN and password on the following site: https://unifiedportal-mem.epfindia.gov.in/memberinterface/


2. From the menu bar, click on the online service option and select the option of claim form 31, 19 and 10c


3. You will be redirected to the member details page where all the details of your account will be mentioned. Enter the last 4 digits of your account in order to verify the account.


4. Once verified, you will be given an option to sign the certificate, click on yes.


5. Click on proceed to claim option and select PF advance form 31 to claim your funds


6. After that mention the reason for the withdrawal and submit the application (in case of advance withdrawal).


7. In this process you may be asked to submit Bank passbook/Cheque and Form 15G if withdrawal is within 5 years of your service.


8. Once the process is done, EPFO will approve the request.


9. Once the request is approved the money from EPF will be transferred to your bank account.


10. You will be informed by SMS.


You may watch this video to understand the process of withdrawal




Frequently asked questions


1. What is EPF mean?


EPF is a retirement advantage plan where both boss and representative contribute a specific level of the compensation.

2. Who is qualified to join EPF plan?


As indicated by the EPF conspire rules, it is required for a representative to join the EPF plot if his compensation is not exactly or equivalent to Rs 15,000 every month. Be that as it may, a worker whose pay is more than Rs 15,000 every month, at that point such a representative can join the EPF plot on the off chance that he and his employees.

3. Does my organization additionally add to my EPF account?


Truly. As per the current EPF rules, a business likewise needs to add to his/her worker's record. A business needs to contribute 12 percent of compensation of a worker. (Pay here is essential in addition to dearness recompense and holding remittance.)

4. Would I be able to contribute higher add up to my EPF account?


Indeed, you can contribute higher to your EPF account. This should be possible by means of Voluntary Provident Fund.

5. After one quits working, would they be able to at present add to EPF?


As per EPFO, a representative can't add to EPF account they quit working. Any

Commitment by the part should be coordinated with the lot of commitment.

6. Who is eligible for EPF?


An organization having more than 20 employees is eligible for providing EPF.

7. Under which circumstances EPF can be withdrawn?


· For a wedding.

· For higher education.

· For purchasing land or constructing a house.

· Repayment of home loan.

· Renovating a housing property


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