Following pressure from trade unions and violence in Bengaluru over the restrictions on withdrawal of Provident Fund (PF) corpus, the government on Tuesday rolled back the notification that introduced these measures.
"Considering the representations received from various quarters and after consultations with the various stakeholders, the government has decided to withdraw the February 10 notification with immediate effect," the labour ministry stated on Tuesday.
Earlier, the Centre had relaxed restrictions on the withdrawal in circumstances like buying a house, medical treatment, marriage, education, among others. It had also deferred the implementation of the norms mentioned in the notification to July 31 from current deadline of April 30. But with the cancellation of the notification, these restrictions are not in effect.
Business Standard takes a look at what do the current rules allow you do with your money.
Then: You could only withdraw the money when you turn 58; the official retirement age in the government .This clause was met with intense opposition from trade unions. In some cases, workers in the garment industry are unsure about finding work. In such a case, waiting for the retirement corpus for another eight years would have been difficult, NDTV reported, citing trade unions.
Now: The age limit to withdraw 90% of the corpus now stands at 54. The rest will be settled on turning 58.
Then: You could only withdraw the employee’s contribution to the fund, along with the interest. The rest amount would have been settled on turning 58.
Now: If you have been unemployed over two months, you can now choose to withdraw the entire amount of the corpus, along with the interest. Employees can also withdraw the employer’s contribution. However, you could face an income tax on the amount if the employee chooses to withdraw before completing five years of continuous service.
Taxation of 60% on withdrawals
Then: In the Union Budget of 2016, Finance Minister Arun Jaitley had announced that withdrawals in EPF could get a tax exemption on 40% of the corpus. It meant that 60% of the corpus withdrawal would face taxes at the time of retirement, thereby eroding a huge chunk of it.
There were widespread protests in the country to roll back the taxation rule. In addition to that, the complexity in taxation for individuals was also questioned at a time when the Centre wanted to simplify the same.
Now: At the retirement age, withdrawals from EPF are completely tax-free.