PF Withdrawal Rules
The provident fund is administered by the provident fund establishment. This is a statutory organization that is under labor and finance ministry. It is responsible for helping out employees in saving a portion of their salaries each and every month. Therefore, employees are able to comfortably save large amount of money that is exempted from taxation and is to be used after retirement. It can also be defined as a long time saving tool and its main is to ensure that employees have a retirement period that is completely stress free.
The money can also use in different in other various major life events taking place such as home renovations, weddings and for medical treatment purposes. Any establishment which has hired more than 20 workers is obligated to register with the EPFO. So as to make optimum use of the account, employees who operate on salaries must ensure that they familiarize themselves with how the account is handled and operated.
Provident fund [EPF]
It is always important to take note that it is 12 % of the basic salary plus dearness allowance and food allowance cash value, if they are provided. The amount redacted goes towards the fund monthly contribution. However the employers are required to contribute 8.33% to the employee pension system [EPS] while 3.67% goes towards the fund. The current interest rate acquired from the most current budget is 8.75% per annum. However, the interest rate can easily change it all depend with the fund organization announcement.
Procedure to follow when you are making a withdrawal on the EPF account
If a member of the fund wishes to make a withdrawal, they are required to fill in form 19 and make a submission to their former employer who in turn is required to attest and sign it. During the form submission, members are required to make submission of other documents which include a letter of resignation, a Cheque which is cancelled. This is to be submitted to the fund organization offices.
- First of all it is important to take note that is considered illegal for one to make EPF withdrawal when he or she is switching jobs from one to another.
- A salaried person is only allowed to makes withdrawals under two circumstances. First, when he or she is completely jobless and second, when two months have passed without he or she securing another employment opportunity.
- Experts in this field advice employees to transfer their account from former employees to current ones so that they can continue saving money. This practice is advisable because of the financial management benefits. Employees are able to save more money earns interest and is tax free
- The Unique Account Number simplifies the money transfer and management process.
- When employees shift from one job to another they are not given new account numbers they just continue operating the original number.
- There are list of ten cities in which the fund can be used in such as medical treatment, marriage, construction or a plot purchasing, loan repayment, retirement, home alterations and miscellaneous.