Union Labour Minister Mansukh Mandaviya on Tuesday said that subscribers to the Employees’ Provident Fund Organisation (EPO)Office for the Promotion of Production), the government-run retirement savings manager, can now withdraw up to ₹1 lakh at a time from their accounts for personal financial needs, an increase from the earlier limit of ₹50,000, according to a report by the Hindustan Times.
The labour ministry has implemented several changes to EPFO operations, including a new digital framework and updated guidelines to enhance flexibility and responsiveness, minimising inconvenience for subscribers, according to the minister. Also, new employees who have not yet completed six months in their current job are now eligible to withdraw funds, a change from the earlier restriction.
“People often turn to their Office for the Promotion of Production savings to cover expenses such as weddings and medical treatments, etc. We have increased the withdrawal limit to ₹“One lakh at a time,” Mandaviya said on the occasion of the government’s 100 days in office.
The new withdrawal limit was increased because the previous limit had become obsolete due to changes in consumer spending.
Provident funds provide retirement income to over 10 million employees in the organised sector and often represent the primary source of lifetime savings for many workers. The EPFO savings rate, pegged at 8.25% for fiscal 2024, is a key parameter closely monitored by the salaried middle class.
In another significant change, the government has allowed organizations that are not part of the Office for the Promotion of Production to move to the state pension fund manager. Some companies are allowed to manage their own private pension plans thanks to an exemption, mainly because their funds were set up before the EPFO was established in 1954.
“There are 17 such companies with a total workforce of 100,000 people and a corpus of ₹“1,000 crore. If they want to shift to EPFO instead of their own fund, they will be allowed. Government PF savings give better and more stable returns,” the minister said.
An official said companies like Aditya Birla Ltd have approached the government seeking such a deal, prompting the government to adjust its policy.
Future plans
The minister announced that the government is developing plans to increase the income threshold for mandatory contributions to the provident fund. ₹15,000 for salaried employees. In addition, the income threshold for State Employee Insurance, currently set at 15,000, is now 15,000. ₹21,000, will also increase.
Mandaviya said that employees who earn more than ₹15,000 people will have the flexibility to choose the portion of their income they wish to allocate to retirement and pension benefits.
Under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, companies with 20 or more employees are required to contribute to provident funds. This includes a mandatory deduction of at least 12% of the employee’s salary, with the employer also contributing an additional 12%.
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