New Delhi: In a significant move, the Union Labour Minister Mansukh Mandaviya announced that subscribers of the Employees’ Provident Fund Organisation (EPFO) can now withdraw up to ₹1 lakh in one go for personal financial needs. This is a substantial increase from the previous limit of ₹50,000.
Why the Change?
The decision to increase the withdrawal limit was driven by the need to keep up with changing consumption patterns. “People often turn to their EPFO savings to cover major expenses like weddings and medical treatments,” Mandaviya explained during the celebration of the government’s 100 days in office. The old limit had become outdated, necessitating this update to better serve the financial needs of subscribers.
EPFO: A Lifeline for Over 10 Million Employees
The EPFO provides retirement income to more than 10 million employees in the organized sector. It is often the primary source of lifetime savings for many working individuals. The interest rate on EPFO savings, currently at 8.25% for FY24, is a crucial metric for the salaried middle class.
New Flexibility for Organizations and Employees
In another major policy shift, the government has allowed organizations that are not part of the EPFO to switch to the state-run retirement fund manager. This exemption primarily benefits businesses with private retirement plans that predate the EPFO’s establishment in 1954. Companies like Aditya Birla Ltd have already approached the government for such arrangements.
Additionally, the government is working on plans to raise the income threshold for mandatory provident fund contributions from ₹15,000 to ₹21,000. This change aims to make provident fund contributions mandatory for a larger segment of salaried employees.
Freedom for Higher Earners
Employees earning more than ₹15,000 will now have the flexibility to decide how much of their income they want to save for retirement benefits and pensions. Under the Employees’ Provident Fund and Miscellaneous Provisions Act of 1952, firms with 20 or more employees must deduct at least 12% of the employees’ salary for provident fund savings, with an equal contribution from the employer.
These changes are part of a broader effort to make the EPFO more responsive and flexible, ensuring that subscribers can access their funds with greater ease and convenience.
