PF: Easing rules for withdrawal
| Photo Credit:
Jasmine Nongrum
In a material overhaul of the Employees Provident Fund (EPF), the Centre has recently amended the provisions of EPF Scheme 1952, replacing it with a 2026 version. The new scheme substantially simplifies conditions for employees to make early withdrawals, standardises waiting periods and puts in place rules to ensure continuity of the provident fund account in the event of career interruptions or personal emergencies. However, reforms in the EPF will remain incomplete as long as issues relating to delays and rejections continue to dog legacy subscribers filing their retirement claims.Before the recent changes, employees’ attempts to withdraw any portion of their balance before retirement age were liable to be mired in reams of red tape. Early withdrawals were allowed only under 13 situations for which the employee had to provide documentary proof, and these were subject to varying waiting periods and sub-limits. Under the new rules, the 13 conditions have been whittled down to four broader categories — marriage, education, illness and housing, with an added carve-out for special circumstances (natural calamities). Arbitrary caps on withdrawals (50 per cent of own contribution for marriage/education, 90 per cent of corpus for housing) and different waiting periods (five years for housing, seven years for marriage, among others) have been done away with. Employees can also withdraw up to 75 per cent of the total balance to their credit, irrespective of end-use. All types of withdrawals will now be allowed if the employee has completed 12 months of service, with the waiting period being waived in the event of job losses.Some have criticised the requirement that employees must retain 25 per cent of their balances. However, this is a pragmatic check on retirement savings drain. Full withdrawals also trigger closures and reopening of new EPF accounts, leading to the proliferation of inactive accounts and unclaimed balances. While attempts to make early withdrawals more subscriber-friendly are welcome, legacy subscribers are likely to be more concerned about the prompt processing of their final claims without rent-seeking by intermediaries. The new scheme has made online mode the default option for filing final claims and set a 20-day deadline for settlement. Final settlement amounts will be electronically transferred to the beneficiary’s account. A penal interest at 12 per cent of the outstanding amount will be charged on the PF Commissioner’s personal salary, if there are delays beyond this deadline — provided ‘all requisite documents’ are submitted.However, the rules contain several escape clauses. Penal interest is only applicable where the Commissioner fails to settle claims ‘without sufficient cause’. Given that rejections due to minor name mismatches are the main reasons for majority of claim rejections, these clauses don’t really offer much comfort to subscribers. One hopes that the ongoing digital overhaul of the EPFO addresses these problems.Published on July 14, 2026
