The Employees’ Provident Fund Organisation (EPFO) plays a vital role in securing the retirement of millions of salaried individuals across India. It manages pension and provident fund schemes for employees in the organized sector. Over the years, the EPFO has implemented several policy changes to streamline processes and enhance transparency. Recently, new rules regarding EPFO pension withdrawal have been introduced. These changes are designed to clarify eligibility, simplify procedures, and bring uniformity across pension claims. Understanding these updates is crucial for those planning to retire or withdraw their pension.
Understanding EPFO Pension Scheme
What is the EPFO Pension Scheme?
The EPFO pension scheme, officially known as the Employees’ Pension Scheme (EPS) 1995, provides a monthly pension to employees upon retirement, permanent disability, or to the nominee in case of the employee’s death. The scheme is a part of the overall EPF benefits package and is funded by contributions made by the employer on behalf of the employee.
Contribution Structure
Under EPS, out of the total employer’s contribution of 12% of the employee’s basic salary, 8.33% is directed towards the pension fund, subject to a wage ceiling. The central government also contributes 1.16% towards the scheme.
New Rules for EPFO Pension Withdrawal
Minimum Pensionable Service Requirement
One of the most significant aspects of the new EPFO pension rules is the reaffirmation of the minimum eligible service for receiving pension benefits. An employee must complete at least 10 years of contributory service under the EPS scheme to become eligible for monthly pension benefits upon retirement at 58 years of age. If an individual exits before completing 10 years, they are only allowed to withdraw the accumulated pension amount and not receive monthly pension payouts.
Online Application for Pension Withdrawal
To improve accessibility and speed up the claim process, EPFO has now made pension withdrawal applications available online. Members can submit Form 10D through the Unified Member Portal using their Universal Account Number (UAN). This online process reduces paperwork and eliminates the need to physically visit the EPFO office, improving convenience for retiring employees.
Higher Pension Option New Guidelines
In light of recent court rulings, EPFO has issued new instructions for employees who wish to opt for a higher pension. Earlier, contributions toward EPS were restricted to the wage ceiling. However, those who had contributed based on actual salary (beyond the cap) can now apply for a higher pension.
Key guidelines for this include:
- Employees must have opted for higher EPS contributions while in service and have proof of joint option signed by employer and employee.
- Eligible applicants can submit a joint option form through the EPFO portal.
- EPFO will verify submitted records, and if approved, pension will be recalculated accordingly.
Withdrawal Benefits for Shorter Service Tenure
If an employee leaves the job before completing 10 years of service, the updated rules allow for a one-time withdrawal benefit. The amount is calculated based on the number of years served and the pensionable salary. This benefit can be claimed using Form 10C, which can also be submitted online.
Changes in Pension Calculation
Pensionable Salary
The pensionable salary is calculated as the average monthly salary drawn over the last 60 months of service. Earlier, it was based on the last 12 months. This change smooths out salary variations and prevents manipulation through short-term salary hikes.
Monthly Pension Formula
The pension amount is calculated using the following formula:
Monthly Pension = (Pensionable Salary x Pensionable Service) / 70
The revised rules reaffirm this formula and ensure consistent application across all EPFO regional offices.
Procedure for Submitting Pension Withdrawal Form
Steps for Online Submission
- Log in to the EPFO Member Portal using your UAN and password.
- Ensure KYC (Know Your Customer) details are updated, especially Aadhaar, PAN, and bank account.
- Navigate to the Online Services section and select Claim (Form-31, 19, 10C & 10D).
- Select Form 10D for pension withdrawal.
- Enter relevant details and upload any necessary documents.
- Submit the form and note the claim reference number for future tracking.
Offline Process
For those who prefer traditional methods or face digital access issues, the option to submit pension claims offline through the employer or EPFO regional office remains available.
Pension Withdrawal After Death of Member
Family Pension and Death Benefits
In the event of an employee’s death, the family (spouse, children, or nominee) is entitled to pension benefits. Under the new rules, EPFO has simplified the procedure for claiming family pension. The claim can be filed using Form 20 (death benefits) and Form 10D (family pension), with streamlined documentation and faster verification timelines.
Enhanced Communication and Tracking
EPFO has implemented improved tracking systems to monitor claim progress. Applicants now receive SMS alerts at different stages, and claim status can be checked online with the UAN number.
Important Points to Remember
Eligibility Verification
Applicants must ensure they meet the eligibility criteria before applying for pension withdrawal. Mismatches in employment records, incorrect service duration, or missing contributions may result in delays or rejection.
Tax Implications
The monthly pension received under EPS is generally taxable as per the applicable income tax slab of the individual. However, one-time withdrawal benefits may not attract tax if the amount is below the specified limit. It’s advisable to consult a tax advisor for detailed guidance.
Reactivation of Inoperative Accounts
In cases where the EPF account has been inactive for more than three years, employees can request reactivation before claiming pension. Reactivating the account ensures all records are up to date and accessible for processing claims.
The new EPFO pension withdrawal rules reflect the organization’s efforts to modernize the pension system, make it more transparent, and improve the experience for members. Whether it’s through online claims, streamlined eligibility criteria, or the introduction of the higher pension option, these changes are aimed at securing the post-retirement lives of millions of employees. Staying informed about these updates allows individuals to make better financial decisions and ensure they receive the full benefits to which they are entitled.