Employee’s Provident Fund Withdrawal For COVID and Its Tax Implications

Due to the COVID-19 pandemic in the country, the government has allowed the Employee’s Provident Fund (EPF) scheme members to withdraw funds from their Provident Fund account. The members having UAN (Universal Account number) and employed in the organisation that is covered under the EPF & MP Act, 1952 are eligible to claim the PF advance.

The maximum amount of advance any member can claim is lower of the following:

  1. Three months basic wages and dearness allowance, or
  2. 75 per cent of the EPF corpus.

Note: The EPF corpus includes employee’s contribution, employer’s contribution and interest earned thereupon. 

For example, The PF account balance of an EPF member is Rs.4,60,000, and a total of three months basic wages and dearness allowance is Rs.1,50,000. 

So 75% of the PF account balance is Rs. 3,45,000. Hence the maximum amount that a member can withdraw from the EPF account is Rs.1,50,000, i.e. the least of the two amounts.

The members of the EPF scheme are not required to repay the amount withdrawn. The advance taken is non-refundable. 

One can claim the advance money online from the website www.epfindia.gov.in or through the mobile app UMANG. To claim the advance amount online, one must ensure that the mobile number is linked with UAN. Also, the aadhaar and KYC of the bank account must be validated with UAN.

The claims for advance to fight COVID-19 are processed on priority without any requirement of any certificate or documents.

An employee can avail of this benefit even while in service. Also, the advance can be claimed irrespective of any advances availed earlier.

Funds withdrawn from EPF attract tax in specific scenarios. However, no income tax is levied if the advance is taken for a covid reason under the Employees Provident Fund (EPF) scheme. 

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in

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