EPF withdrawal shock: Why early exit, taxes and tech glitches reduce your returns  

For many employees facing financial strain, tapping into their Employee Provident Fund (EPF) savings seems like a reliable lifeline. Overseen by the Employees' Provident Fund Organization (EPFO), these funds grow steadily through regular contributions by both employer and employee.

But for some, the moment of withdrawal brings an unpleasant surprise: the amount received is less than what their passbook shows. Here's a breakdown of why this happens — and what employees can do to avoid it.

A major reason for the shortfall during EPF withdrawals is the deduction of Tax Deducted at Source (TDS). If an employee withdraws their EPF before completing five continuous years of service, the amount becomes taxable. In such cases, a 10% TDS is levied if the employee has a PAN card. Without a PAN, the rate can shoot up to 34.608%. However, smaller withdrawals under Rs 50,000 are exempt from TDS.

Beyond taxes, a portion of the EPF contribution is allocated to the Employee Pension Scheme (EPS). This amount isn’t reflected in the final EPF withdrawal, often causing confusion. Moreover, delays in transferring funds from previous provident fund accounts to the current one can result in mismatched balances. Sometimes, technical glitches delay passbook updates, leading employees to assume they have more funds than they actually do.

Withdrawals — partial or full — are not allowed while an individual is still employed. But different rules apply in case of unemployment. After one month without a job, employees can withdraw up to 75% of their EPF balance. If unemployment continues for two months or more, the remaining 25% becomes eligible for withdrawal. Even in such cases, TDS may still apply, affecting the final payout.

To avoid surprises, employees are advised to regularly update their passbooks and ensure all forms — especially Form-19 and Form-10C — are correctly filled and submitted. EPF balances can be checked easily through the Umang app, missed call services, or SMS from EPFO.

Understanding these rules and procedures can help employees make informed decisions and avoid unexpected deductions when withdrawing their EPF savings.