With the economy slowing and salary delays becoming a commonplace, you may find yourself in a cash crunch trying to maintain all expenses and repaying your liabilities. In such a situation, you may consider liquidating your assets to make ends meet. While you can exit your mutual fund investments, sell off real estate, although good luck with clinching a deal on time, or even liquidate your jewellery, can you withdraw money from your Employees’ provident Fund? Not really and there is a good reason for that.
The Employees’ Provident Fund Organisation (EPFO) is a long term vehicle that helps you accumulate a retirement corpus. Given the goal of this product making liquidity easy would run counter-productive and so it’s only under certain circumstances that you can withdraw from your EPF kitty. “Premature withdrawals are generally not allowed from your EPF account, unless you’ve given up working or want to be self-employed. However, you can withdraw a portion of your EPF savings prior to retirement only for specific reasons such marriage or education of yourself, your siblings, or children or to cover emergency medical expenses for yourself, spouse, children, or dependent parents," said Adhil Shetty, chief executive officer, Bankbazaar.com, an online financial services marketplace. Here’s a list of specific reasons that allow you to go for partial withdrawal on your EPF.
A subscriber can make partial withdrawals on account of repaying a home loan, or buying a house or even renovating a house. You can also make withdrawals in case of a medical emergency or if you wish to dip into your EPF corpus to fund your education or the education of your children. EPF funds can also be accessed partially to fund one’s own marriage or marriage of the kids or siblings. Of course there is a limit to how much you can withdraw or how often you can withdraw. Keep in mind that in case of a medical emergency you can withdraw any number of times up to the cap specified.
The process for withdrawal
Earlier, it was mandatory for employees to have the attestation of their employers to facilitate a withdrawal. Today, that is no longer the case. “You can file a withdrawal claim using your UAN on the EPFO portal. To do this, it is essential that your UAN has been activated, your Aadhaar is linked to your UAN, and the bank details and KYC documentation updated on the portal," said Shetty. On the UAN portal, under the ‘our services’ tab, select the ‘claim’ option from the drop-down list. You need to then choose the type of withdrawal claim you wish to file—full withdrawal, partial withdrawal or pension withdrawal. The drop-down box with the types of withdrawal will only be displayed if the subscriber is eligible to avail it. “The claim is then forwarded to the employer for approval. Once approved, the PF amount will be credited to the subscriber’s account within 10 days," said Shetty.
The idea of offering partial liquidity and full withdrawal during unemployment is so that you are able to access your hard earned money when in dire needs. And the process to make a claim has become much better, but remember, EPF offers one of the best post tax returns among debt products. “EPF provides returns at a stable rate of interest and as a long-term investment option, it is an excellent way of building up a corpus,"said Shetty. Currently, the rate is 8.65% and therefore it’s in your interest to keep the account untouched so that it compounds to a neat corpus for your retirement years.