PF Withdrawal Rules: The Employees’ Provident Fund Organization (EPFO) has recently released a poster on social media . In this, people have been warned that if they withdraw Provident Fund (PF) money by making some excuse, then recovery action can be taken against them. Or they may have to face a cut in their future pension.
Let us know why EPFO has issued this warning, under what circumstances PF money should be withdrawn and what are the disadvantages of withdrawing PF money prematurely.
Why is it wrong to withdraw PF for unnecessary expenses
PF is a means of financial security for your life after retirement. This money is compounded in the long run. This means that interest is also earned on its interest. In such a situation, PF creates a strong fund in the future. But many times people withdraw PF for holidays, shopping, festivals or other non-emergency needs. These withdrawals may provide immediate relief, but weaken future security.
Under what circumstances is withdrawal correct
EPFO has put some situations in the valid withdrawal category. Such as buying or constructing a house, children’s education or marriage, medical emergency, or long-term unemployment. In these cases too, the withdrawal limit is fixed and documentary formalities are necessary. EPFO has also made a rule that how many times you can withdraw money from PF for which reason.
When is a recovery situation created?
If a member withdraws funds for a false reason or submits incorrect documents, EPFO can ask for the withdrawal amount back. For example, a person has to go on a trip but withdraws money by making an excuse of medical emergency. Also, it is possible that the pension of that person may be reduced later. In such cases, both the employer and the employee can be held accountable.
How does EPFO do recovery?
EPFO has the capability to cross-verify its records and data. If a member withdraws funds citing a wrong reason, the department can later consider that withdrawal as ‘unapproved’ and take recovery action. This may include steps like demanding the money back along with interest, sealing the account or blocking future withdrawals.
How to avoid unnecessary withdrawals?
If PF is being deducted from your salary every month, then it is an important part of your retirement planning. Spending it in a hurry can harm your long term financial strategy. It is better that you keep medical insurance, emergency fund and other backups ready so that PF has to be used as a last resort.
What is PF (Provident Fund)?
PF i.e. Provident Fund is a savings scheme in which employed people deposit a part of their salary every month. The company also contributes an equal amount. This money is deposited with the Employees Provident Fund Organization (EPFO) and also earns interest. Employees can withdraw it during the job or after retirement, which provides financial security after retirement.
