A senior government official has defended the new withdrawal rules. He told Moneycontrol that the government believes that EPFO subscribers should get interest every year on the money deposited in their EPF account. Therefore, the time period for withdrawing the money deposited in EPF after leaving the job has been increased from 2 months to 12 months.
When asked the reason behind increasing the time period for withdrawal of the entire amount, the official said, “If the subscriber withdraws the entire amount only after 12 months, the interest amount will be credited to his account at least once.” According to the new rules, subscribers will have to maintain at least 25 percent balance in their account. This rule will apply even if you leave the job. This period will be of 12 months, which was earlier 2 months.
This can be understood with the help of an example. Suppose an EPFO subscriber has Rs 10,000 deposited in his account. The subscriber can withdraw only Rs 7,500 from this for one year of being unemployed. The officer said that he will get interest money on Rs 2,500 deposited in his account. He said, “It has been observed that subscribers withdraw the entire amount after two months of leaving the job. Soon after that, the subscriber gets employed again. In such cases, he does not get the benefit of interest.”
He said that the government believes that subscribers should get full benefit of interest. This will increase his fund. EPFO data shows that 50 percent of EPF members have less than Rs 20,000 in their accounts at the time of settlement. 87 percent of the members have less than Rs 1 lakh in their accounts at the time of final settlement. This indicates that subscribers fail to create a fund that could be of great use to them later. For this reason, the government has increased the period for withdrawing the entire amount from 2 months to 12 months.
Sources said that total deposits of subscribers with EPFO are Rs 26 lakh crore. The total number of active subscribers of EPFO is around Rs 7.5 lakh crore. Active subscribers mean those people who are currently employed and from whose salary a fixed amount is deposited in the EPF account every month. Experts say that EPFO’s decision to increase the time limit for withdrawing the entire amount seems right.