The EPFO recently warned subscribers that EPF funds should not be used for unauthorized purposes. The EPFO stated that subscribers who use EPF deposits to invest in unauthorized schemes may face action and penalties.
Withdrawals are allowed in these situations
Actually, this entire matter is related to withdrawing some of the EPF money before retirement . Under the EPF Scheme, 1952, withdrawal of a portion of the EPF money is permitted under certain circumstances. These include higher education, marriage, medical treatment, and home purchase. Apart from this, PF money cannot be withdrawn for any other reason. This is because the EPF money is meant for a person’s post-retirement needs.
The entire money is received only after retirement
Under EPFO rules, the entire EPF deposit is available only upon retirement. An employee can withdraw EPF funds if they remain unemployed for more than two months. There is a two-month waiting period after the employee leaves the job. Subscribers also need to understand that if EPF funds are withdrawn before completing five years of service, they are taxable.
Action will be taken against misuse of funds.
If EPF funds are withdrawn and misused, the EPFO has the right to take action against the subscriber. They can recover the entire amount along with interest. This can be understood with the help of an example. According to the EPF Scheme, 1952, withdrawal of some of the EPF deposited in EPF is allowed under special circumstances. Suppose an employee withdraws EPF funds to build a house, but uses it for some other purpose. This would be considered misuse of funds. The employee will then be prohibited from withdrawing for the next three years. If they repay the money along with interest, the ban can be lifted.
Experts say that the purpose of a provident fund is to ensure the subscriber’s financial security after retirement. This is why pre-retirement withdrawal rules are very strict. If a subscriber withdraws this money before retirement and spends it on other things, they may face financial difficulties after retirement.
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