PF isn't only for retirement!
How to withdraw your PF before you retire?
In our previous newsletter, we discussed how PF returns can sometimes rival debt and even equity over the long term if you increase your PF contributions through your employer.
But the common worry with PF is the same for everyone: what’s the point of investing in PF if I can only withdraw it at retirement?
Traditionally, yes, PF is meant as a retirement tool. However, there are several other scenarios where you can withdraw from your PF.
A few years ago, withdrawing from PF was a real struggle. However, the government has made it a point to fix this issue.
The number of PF verification parameters reduced from 27 to 18, with 95% of claims now settled within 3-4 days, as reported by NDTV.
So, what are these cases, and how much of your PF can you actually withdraw? Let’s break it down:
What You Need To Know
Most cases require you to complete a minimum tenure of service.
This means your PF strategy should align with your life plans. For example, if you plan to quit your job in the next 3–5 years to start your own business, it may be wise to increase both your own and your employer’s PF contributions.
Once you leave your job, you can withdraw the balance after two months of unemployment, while also enjoying tax-free returns and tax savings on the employer’s contribution in the meantime.
Also, if the job is terminated due to ill-health, company closure, or reasons beyond your control, then withdrawal before 5 years is also tax-free.
Note: Withdrawing from your PF can still be tedious if you have multiple PF accounts not linked to a single UAN. In such cases, it’s best to reach out to professionals who can assist you with the withdrawal process. The PF office is working on EPFO 3.0, which aims to streamline functions and simplify operations, but it has not yet been released. Considering EPFO 3.0, there might be some more changes in the above withdrawal rules.
A pro tip: Once you stop contributing to your PF, it continues to earn interest for up to 36 months, but that interest becomes taxable.
If you’re not planning to rejoin employment, it’s usually better to withdraw earlier, since after 36 months, no interest is earned.
We explored the tax benefits of investing in EPF in greater detail in an earlier newsletter; check it out here.
Happy compounding,
CA Nitesh Buddhadev
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