What are the main changes proposed?
Among the changes announced on Monday, the current 13 complex conditions for partial withdrawals will now be grouped into three broad categories.
“Earlier, EPFO had 13 specific conditions with separate limits and eligibility rules. We’ve simplified them into three categories,” said Madhu Damodaran, CBT member and regional managing partner at AMLEGALS, a boutique law firm.
“The first covers milestone events like marriage, education, or illness of oneself or family members. The second pertains to housing, and the third allows for special circumstances, where the employee can define what justifies a withdrawal. Each category specifies how much can be withdrawn, how frequently, and to what extent.”
The number of times one can withdraw for education and marriage has also been increased to up to ten and five times, respectively, compared with the earlier combined limit of three partial withdrawals.
Currently, employees must complete a minimum service period that varies depending on the reason for withdrawal. This will now be standardised to 12 months for all categories.
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What are the other proposals?
Another proposal mandates that 25% of PF contributions be maintained as a minimum balance at all times. Members would still be allowed to withdraw up to 100% of the eligible balance — that is, the remaining funds after retaining the 25% minimum.
“For all types of partial withdrawals, members must maintain at least 25% of contributions as a minimum balance. After that, withdrawals of up to 100% of the remaining amount are permitted under specific provisions, such as for housing,” explained Damodaran.
Further, members will no longer need to submit any documents for partial withdrawals. “Simplified provisions, greater flexibility, and the removal of documentation will enable 100% auto-settlement of partial withdrawal claims, improving ease of living,” said an EPFO press release.
What about the final settlement?
Accessing your full PF balance after leaving a job will become more difficult. Final settlement will now be allowed only after 12 months, compared with the current two-month rule. Women, under special circumstances, can withdraw immediately under existing rules. It is unclear if it will be allowed under new set-up. For employees’ pension scheme (EPS) withdrawal, the waiting period will rise from two months to 36 months.
“Nearly 48% of EPFO members have less than ₹20,000 at the time of retirement, based on final settlements made during 2024–25. Frequent job changes are the main reason,” Damodaran said. “While linking UAN to Aadhaar has curbed this to some extent, withdrawals remain high, especially among lower-income earners — defeating the purpose of long-term retirement savings.”
What the changes mean for you
While simplifying partial withdrawals is a welcome move, adding restrictions to final settlement could create more problems than it solves, said Kunal Kabra, founder and CEO of Kustodian.life, a tech firm that handles EPF-related claims and settlements.
“Since eligibility for EPS or other components is checked only during full withdrawal, increasing the waiting period after quitting one’s last job will make it harder to get employer support if issues arise,” he said.
He added that having different timelines for EPF and EPS withdrawals would only add to the confusion. “Making it 12 months for EPF and 36 months for EPS will complicate the process,” Kabra noted.
The change could also hurt those who need access to funds soon after leaving employment. “At a time when layoffs are frequent, delaying access to one’s savings is unfair. It also impacts people planning to quit and start a business, as they won’t be able to use their PF corpus for at least a year,” Kabra said.
“This would also be problematic for those moving abroad, as their withdrawal process will become more cumbersome,” he added.
Notably, only full withdrawal has been restricted to 12 months. Partial withdrawals will still be allowed during this window. “An increase in the waiting period for full PF withdrawal could actually benefit lower-income employees, who often switch jobs and withdraw their PF frequently,” said Ketan Das, PF business head, FinRight, a fintech start-up simplifying EPF withdrawal process.
“However, the move could work against retirees and higher-salaried individuals, as it would lock up 25% of their corpus — a substantial amount. What remains unclear is whether the interest earned on this retained portion would be taxable, since under current rules, PF interest becomes taxable once contributions stop,” Das added.
What about implementation?
The EPFO has not announced a timeline for implementing the proposed changes. The changes will come into effect after a gazetted notification.
“They require an overhaul of para 68 of the EPF scheme, which contains multiple provisions. We’ll need to study the fine print and how it aligns with existing schemes to understand when and how these proposals will take shape,” said Anurag Jain, co-founder and partner at ByTheBook Consulting LLP, a tax and PF advisory firm.
