NEW DELHI: In a bid to dispel confusion and misinformation, the Labour Ministry on Wednesday issued a clarification saying that contrary to the belief that no withdrawal is possible, the new rules allow for an immediate 75% withdrawal upon leaving a job.
“If the individual remains unemployed for one year, the entire balance can be withdrawn,” clarifies the ministry.
This change, the ministry argues, is designed to protect the subscriber's long-term interests. The previous system of frequent, partial withdrawals often led to breaks in service history, which was a primary reason for the rejection of many pension claims. It also left employees with a very small final settlement amount.
"These new provisions will ensure continuity of service, a healthy final PF settlement amount, and no financial hardship for the family," the ministry clarifies.
Also, countering the myth that 25% of an employee's funds have been locked in, the ministry stated that the old system was fraught with complexity. It involved 13 different categories, each with numerous conditions that often led to funds getting stuck.
"The entire process has been simplified into a uniform provision," the ministry document explains. "This will now allow for easy withdrawal without any cumbersome documentation in most cases."
The ministry emphasised that in almost all scenarios, the permissible withdrawal amount or frequency has been increased, not reduced.
A key reform highlighted is the reduced waiting period for withdrawals for specific needs like marriage or purchasing a home. Previously, subscribers had to wait 5 to 7 years; the new rules allow them to access funds for these purposes after just one year of service.
The ministry further says that withdrawal limits for critical needs such as education and illness have been made more flexible. In a significant move, the ministry has also introduced a provision for unforeseen emergencies. Subscribers can now withdraw their full eligible amount up to two times a year without any questions asked under special circumstances.
In a bid to ‘relax’ withdrawal rules, the Employees’ Provident Fund Organisation (EPFO) has approved members to access up to 100% of their eligible provident fund balance, subject to a mandatory minimum balance cushion. While most of the relaxations are likely to ease the process of withdrawal, experts cautioned against diluting the safety net of lower and middle income groups for their retirement period.
Major relaxations include reducing the minimum service requirement for withdrawals to just 12 months across all categories—down from previously diverging thresholds (for example, 5–7 years for education, marriage, or housing). Under the new rules, subscribers must retain 25% of their total EPF corpus in the account at all times, meaning effectively a maximum withdrawal of 75% during their active employment.
