The government of India launched the employee Pension Scheme (EPS) in 1995; therefore, it is also referred to as Employee Pension Scheme 1995. EPS comprises both new and existing members; it was created to provide social security to employees. Under this scheme, the employee becomes eligible for pension withdrawal after his retirement at the age of 58.
The employer and employee play an equal role in EPS as both need to pay an equal amount every month. Every month, the amount deducted from the employee’s salary is 12% of the basic salary.
PF is an important component in every employee’s salary; therefore, it is essential to keep a check on it and understand the PF pension withdrawal process in-depth. In fact, there are certain conditions under which you can take out the partial amount, but we will learn about that later in this blog.
But it is recommended to withdraw pension funds after retirement as you can get various benefits such as it is tax-free, you get a huge amount, and it makes your retirement easy.
What is EPS withdrawal?
EPS is available to all employees who are eligible for the Employee Provident fund. This scheme is managed by the Employee Provident Fund Organization (EPFO); it is a statuary body controlled by the government of India. You can make an EPF pension withdrawal only if you are a member of EPFO.
To get the pension withdrawal, you must have worked for at least 10 years and should be a minimum of 55 years of age if you wish to make a PF pension withdrawal early. You will be glad to know that if the pension is not paid and you turn 60, you will get a 4% additional rate on the pension amount.
You can request a pension at the age of 50, and there are four ways of doing it: complete PF pension withdrawal, pension withdrawal in small amounts, flexible drawdown, and an annuity.
- If you withdraw early, you do not have to pay tax for the first 25%. The remaining 75% is taxable, but this will depend on whether you pay tax, and how much tax you pay depends on your circumstances and salary.
- According to EPS rules, if the employee has completed less than 10 years of service on the date of exit or is of the age of 58 years (whichever is earlier), they are eligible for lump-sum withdrawal from the PF pension withdrawal.
How to EPFO pension withdrawal?
You will be glad to know that now you can do pension withdrawal online, sitting at home. Now, you need not stand in long queues to get the pension amount. Let us know the easy steps of pension contribution withdrawal. There are two ways of doing it-
1) PF Pension withdrawal with Aadhar card
- The first thing you need to do is activate your UAN on the EPFO official website.
- Once this is activated, you need to fill in your Aadhar card number and bank account details on the UAN portal.
- You need to submit a new Form 11 to your employer. Ensure that you fill in the correct details and double-check them before submitting it.
- The next thing you need to do is submit a composite claim form (Aadhar) to the nearest EPFO office and a cancelled cheque along with it.
2) PF Pension withdrawal without Aadhar card-
- You will have two submit two copies of Form 15G or 15H
- If your service period has been less than 5 years, then you will need to submit your PAN card details
- Provide UAN; in case it is not available with you, provides your PF account number
- The last thing is submitting a composite claim form (Non-Aadhar) to the nearest EPFO office.
How to make PF pension withdrawal online?
Do PF pension withdrawal online sitting at home by following these simple steps-
- Login to the UAN portal
- Click on the tab ‘Online services’ and select the ‘Claim (Form-31, 19 & 10C) button under it.
- Here, you will see the member details; enter the last four digits of your account number to verify the account.
- To sign the certificate, click on yes, and after that, select the option ‘Proceed for online Claim.’
- Once this is done, select PF Advance (Form 31)’ to withdraw the pension amount.
- Select the purpose of withdrawal and the amount needed plus your address
- Click on the tick and submit your application
- You will need to upload two photographs and a PAN card
- As soon as your employer approves the request, you will be able to make a PF pension withdrawal.
Pension Withdrawal in different situations
You might need to make the PF pension withdrawal before becoming eligible for it. Here is how you can do that-
- EPFO Pension withdrawal for less than 10 years of service–
You can claim for pension fund withdrawal even if you have not completed 10 years in service. For such withdrawals, you will have to fill out the composite claim form, select the Final PF balance option, and click on Pension withdrawal.
- EPFO Pension withdrawal for more than 10 years of service-
If you have worked for more than 10 years, you cannot do EPF pension withdrawal before you turn 58, except under special circumstances.
- Pension withdrawal between 50 to 58 years of age and served more than 10 years of service
In such cases, you can make a PF pension withdrawal. All you need to do is fill out the Composite Claim Form and 10D.
- Pension withdrawal at the age of 58
If you reach 58 years of age, you can withdraw the complete amount just by filling out form 10D.
Features of Employee Pension Scheme
- Guaranteed returns- A lot of people prefer EPS because the Government of India manages it. Furthermore, the returns are guaranteed, and there are no risks. The pension withdrawal amount cannot be modified.
- Minimum Pension- Individuals under the EPF scheme automatically come under EPS. In EPS, the individual gets at least Rs.1000 a month which can make a considerable amount when making the PF pension withdrawal.
- Eligibility criterion- All employees who earn a basic salary of more than Rs.15,000 in a company with more than 20 employees are eligible for this scheme.
- Pension Contribution Withdrawal- An individual can withdraw the pension with full benefits when they are 58. They can also withdraw it at the age of 50. But, in such cases, you will get a lesser interest rate.
Did you know?
- If the EPS payment is being given to a widow or widower, they will continue to get this amount until they die. After that, the children will get the pension amount until they reach the age of 25. In case if the child is physically disabled, they get the pension amount till the time they are alive
- Under any circumstances, if the EPFO member becomes permanently disabled, they are eligible to get monthly pensions. Their employer must deposit EPF minimum pension funds into their EPF account for just 1 month for them to become eligible for this pension. In such cases, the minimum service period required to get monthly pensions is ignored.
Word to Remember
Certificate of Pension- An employee gets the certificate of pension if they have been in service for more than 10 years. This certificate consists of pensionable salary, pensionable service, and the PF pension withdrawal amount you will get on the exit from employment.
Suppose the employee changes the job in a company covered under the same scheme. In that case, the previous pension certificate shall be considered for pension along with a new period of pensionable service.
How Much Can an Individual Withdraw from The PF Account?
The lesser the term of employment, the lesser the PF pension withdrawal amount that you will get. The employees are given the amount in lump sum as per the Table D-EPS scheme 1995-
|Service Years||The proportion of Wages at Exit|
This was everything about the Pension contribution withdrawal; the steps are pretty easy and can be done seamlessly. It is recommended to withdraw the complete amount after the age of 58, as if you withdraw a lump sum, you will have to pay taxes on that. But, it is not very clear under which head in the income tax laws it is taxable.
A1. You cannot contribute any amount after quitting the job as it is impossible to do that without a salary. There is an equal contribution required by the employer in EPF as per the guidelines.
Q2. What are the documents required for pension contribution withdrawal?
A2. The main documents needed for PF pension withdrawal are form 19, form 31, form 10C & 10D, two revenue stamps, identity & address proof, and a bank account statement.
A3. As per the guidelines by EPFO, you can close the account and take the entire pension amount in case of job loss.
A4. You can take up to 25% of your pension amount tax-free in a lump sum if you are 55.
A5. You can get access to the entire pension amount and avoid tax if you have a medical emergency.
Read more about Government Pension Scheme.