What is PF: -
Provident fund is one of the retirement benefit for employees. This fund is maintained by Employees Provident Fund organization(EPFO). Provident fund is a part of employee’s salary deducted by the employer and contributed to government along with employer’s contribution also. This can be withdrawn or transferred at the time of Job change or retirement.
Rate of contribution into PF account?
Employee has to contribute a minimum of 12% of his basic salary towards PF. Employee can contribute more also. Employer will contribute an equal amount contributed by the employee.
Division of Contributions: -
Employers entire contribution will go to PF account. Whereas out of employee’s contribution, 8.33% goes to Pension fund and remaining to Provident fund.
When can you withdraw PF?
Provident fund can be withdrawn,
• During employment
• After retirement
It is always advisable to withdraw amounts after retirement.
What are the situations you can withdraw PF during employment?
Assesse can withdraw PF during employment in partial or full for certain situations.
1. For medical treatment: -
a. Can be withdrawn for medical treatment of self, wife, children, parents.
b. Maximum amount = 6 month’s salary. (basic +DA)
c. Form-31 is to be submitted.
2. For Marriage or education: -
a. For marriage of self, brother, sister, children and for education of self or children.
b. Maximum amount is 50% of employee’s contribution in PF account till date along with interest.
c. Period of employment should be at least 7years.
3. For house construction or purchase: -
a. Maximum amount = 2 year’s salary. (basic +DA).
b. Period of employment should be at least 5 years.
c. Form-31 is to be submitted.
4. For Repayment of home loan: -
a. PF can also be withdrawn for repayment of home loan also.
b. Minimum period in job = 10 year’s.
c. Maximum amount that can be withdrawn is 2 years of salary.
d. Salary refers to Basic + DA.
5. Before one year to retire: -
a. PF can be withdrawn before 1 year of retirement but after 57years of age.
b. 90% of PF can be withdrawn at this point.
6. Miscellaneous situation: -
PF can be withdrawn in some other situation like unemployed for 2 months or more; destruction of property in natural disaster and for investing in Varshitha Pension Bhima Yojana.
Withdrawal of PF after employment: -
After retiring from employment and has no intention of joining any other employer, assessee can withdraw his provident fund in full as final settlement. Form-19 is to be filled for final settlement.
Procedure for withdrawing PF: -
1. Fill the relevant form and submit it to the employer. (Form-19 or Form-31 as the case may be)
2. Employer will verify these forms and submit them to Regional PF office.
3. The regional PF office will process and verify the documents.
4. Amount will be credited to the assesses bank account.
PF is a retirement benefit fund, so it is better to not withdraw any amount before retirement. Every time you change the job it is required to transfer PF from one employer to another employer. PF withdrawn before 5years of service is taxable to the amount of interest accrued on it. TDS is also deductible while effecting payments more than Rs. 50,000.