PF Withdrawls Directly From ATM Starting Next Year: Details

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The recent announcement by Labour Ministry Secretary Sumita Dawra that Employee Provident Fund (EPF) subscribers will be able to collect their claim money directly from the ATMs starting from January 2025 is a breath of relief for millions of people who have an active EPF account. In light of this development, it becomes relevant for businesses and employees to learn about EPF, its functions, how it works, and why this announcement is a piece of big news for the country.

EPF: The Basic Idea

EPF stands for Employee Provident Fund. It is a social security scheme that aims to serve as a financial savings instrument for working-class people, act as a source of pension during their retirement, and also be a buffer that looks after their financial requirements in times of need or emergency. EPF is managed by the Employee Provident Funds Organisations (EPFO).

The benefit of this scheme is that it provides a steady savings option for the working class. It yields reasonably high returns and is very risk-free due to government backing. Additionally, the amount contributed to the fund, the interest, as well as the capital gains on the accumulated amount are exempted from tax.

How does EPF work?

The scheme applies to a person earning Rs. 15,000/- per month or higher. It works by contributing a fixed rate of 12% of an employee’s salary towards the savings fund. On top of that, the employer organisation contributes 12% to the fund from their side, which is broken into two components:

8.33% goes to the Employee Pension Scheme (EPS), and
3.67% goes to EPF

These percentages are calculated upon the basic salaries of the employees plus the dearness allowance. Since private sector firms do not have the DA component, their EPF contributions are calculated on the basic salary itself. All other parts of the salary like travel allowance, HRA, etc, are not considered for EPF calculations.

EPFO provides an interest of 8.25% (rate declared for FY 2023-24) on the combined contributions from the employer and the employee. This makes EPF a reasonably high-yielding investment option.

Any organisation with 20 or more workers employed must register under the EPF scheme compulsorily. Organisations that have employed less than 20 persons can also register under the scheme voluntarily, in which case they will be required to contribute 10% to the fund as an Employer’s contribution.

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Withdrawals Under EPF

Withdrawal of your money from the EPF account is allowed only under very specific conditions. To begin with, 100% withdrawal is allowed upon:

Reaching the age of retirement (58 years)
Being unemployed for a period of two months or more, and
Premature death of the subscriber, in which case the money can be claimed by the beneficiary (family members or nominees)

Other scenarios under which partial withdrawals are allowed are:

Marriage or education
Construction or Purchase of House
Repayment of loans under special cases
Medical emergencies
Withdrawal before retirement
Other special cases

There are various conditions attached to each scenario relating to the eligibility for withdrawal and the withdrawal limits. To learn more about them, you can visit the details provided on the EPFO website.

The Big Announcement

So, having discussed EPF, its functions, as well as the nuances of withdrawal, let us look at the announcement once again.

The option to withdraw EPF money from ATMs is a move towards increasing convenience for the members of the EPF scheme. Now, beneficiaries will not have to engage in the lengthy claim settlement process and will be able to get their own money in their hands at the time of their needs. Hence, this is a welcome move and would benefit more than 7 crore people who have registered with the EPF scheme.

The details about the exact mechanics of the ATM withdrawal process will be announced soon. Until then, stay tuned to our website to receive more such compact updates that are relevant to the operations of your business.