Withdrawal of Provident Fund

Under pressure from protesting trade unions, the Centre has cancelled a notification that tightened rules for the withdrawal of Employees’ Provident Fund (EPF) accumulations till the age of 58. The decision was announced in Hyderabad by Labour Minister Bandaru Dattatreya hours after violent protests by workers and labour unions, mainly in Bengaluru, against the curbs on withdrawing employer’s contribution from EPF accumulations.

The notification on EPF withdrawal was originally to be implemented from February 10 but later put on hold till April 30 and deferred further till July 31

Labour unions and workers’ groups opposing this amendment to the EPF Act have voiced concerns that the new rule would take away their right over the employer’s portion of PF till the employees reach 58 years of age. This is the second rollback on the revised EPF withdrawal norms announced in this year’s budget — the government had to earlier scrap its proposal to make 40 per cent of the corpus taxable on withdrawal.

Earlier on Tuesday, Dattatreya had indicated that a meeting of the Central Board of Trustees would be called “to see how best the employers’ contribution to EPF (3.67 per cent of basic wages) can be utilized for workers”. Dattatreya had also said in his briefing that the Labour Ministry was considering allowing withdrawal of all accumulations by EPFO subscribers on grounds like purchase of house, serious illness, marriage and professional education of children.

In February, the EPFO had amended the EPF Scheme 1952 to revise norms, including an increase in the age limit for filing such claims by retiring employees from 54 years to 58. Besides, the EPFO also restricted the withdrawal of PF funds to the contribution of subscribers and interest earned by them on that, if the claimant has remained unemployed for more than two months — the employer’s contribution could be withdrawn only on maturity.

The Labour Ministry in a statement said the amendment was carried out with the consent of trade unions and with the intention of promoting a decent accumulation of provident fund for members at the end of their “working lifetimes”.

“In February, some trade unions and workers had demanded restrictions on PF withdrawals. The notification was issued at their behest. It was only at the last CBT meeting that they expressed their reservations regarding the change in withdrawal norms and said that it was not working. Now they have gone back on their original demand. We thought if we could align their demands and provide certain relaxations for withdrawing for some reasons, then why not withdraw the new rules completely. So we thought of cancelling the February notification,” Labour Secretary Shankar Aggarwal told.

The workers’ representatives on the Employees’ Provident Fund Organization’s Central Board of Trustees (CBT), though, refuted this version.

“First of all, they should not have issued the notification in February. On March 29, the trade unions had requested the government to give an option to workers to have the freedom to choose to withdraw or keep the money with EPF. But the government did not understand the proposal. This is a bureaucratic bungling, which could have been easily avoided. They did a mistake and they have corrected it. It should not have happened in the first place,” said A K Padmanabhan, board member of the CBT and president of CITU.

The scrapping of the notification also means that EPFO subscribers who are out of job for more than two months can file for full and final settlement of provident fund, including the employers’ share of 3.67 per cent.