Big Relief for EPFO Members: Auto Withdrawal Limit May Increase to ₹5 Lakh; Know Tax on Withdrawal

The Employees’ Provident Fund Organisation (EPFO) is set to introduce a significant reform that could dramatically improve access to provident fund savings for its members. According to a Moneycontrol report, the Central Board of Trustees (CBT) is expected to approve the proposal to raise the auto-settlement limit for advance claims (ASAC) from ₹1 lakh to ₹5 lakh in its upcoming meeting.

This move is aimed at further reducing dependence on manual verification processes, enabling swifter access to funds, especially in cases of emergencies or immediate personal financial needs.

Read More: EPFO 3.0 Set to Launch by May-June: Will It Ease Withdrawal Challenges? 

From ₹50,000 to ₹5 Lakh: The Evolution of Auto-Settlement

In May 2024, the EPFO had already raised the ASAC limit from ₹50,000 to ₹1 lakh. This led to a noticeable impact on member experience, as auto-settled claims more than doubled, from approximately 9 million in FY24 to about 20 million in FY25.

Building on this momentum, the proposed hike to ₹5 lakh signals a broader push towards digital automation and ease-of-living reforms under the EPFO’s administrative goals.

No More Waiting: Faster Access to Provident Fund

Currently, any EPFO withdrawal request above ₹1 lakh requires manual verification. This often involves physical visits to EPFO offices and longer processing times, especially in urgent cases such as medical emergencies, education fees, or home repairs.

With the proposed auto-settlement limit increase to ₹5 lakh, such claims could soon be processed instantly and electronically, eliminating the cumbersome approval process and offering timely relief to members.

UPI and ATM Withdrawals on the Horizon

Apart from enhancing the ASAC limit, the CBT is also expected to consider the implementation of new withdrawal mechanisms, including UPI and ATM-based access to EPFO funds. The National Payments Corporation of India (NPCI) has reportedly developed the framework that would support such seamless digital transactions.

If approved, this would represent a major leap in aligning the EPFO with India’s growing digital payments ecosystem, making provident fund management far more accessible for the average member.

How are EPF Withdrawals Taxed?

EPF withdrawals are taxed depending on how long you have worked and the reason for the withdrawal. The tax rules vary depending on whether the withdrawal is made before or after 5 years of continuous service, and whether it is due to reasons beyond your control. Here’s a simple breakdown of when tax is applicable and when it isn’t:

• Withdrawal below ₹50,000 before 5 years of service

1. • No TDS (Tax Deducted at Source) is applied.

   • However, if you fall under the taxable income bracket, you must declare this amount in your income tax return.

2. Withdrawal above ₹50,000 before 5 years of service

   • TDS at 10% is applicable if you provide your PAN.

   • No TDS will be deducted if you submit Form 15G or 15H (subject to eligibility).

3. Withdrawal after completing 5 years of continuous service

   • No TDS is deducted.

   • The amount is fully exempt from tax, so you don’t need to declare it in your tax return.

4. Transferring EPF from one job to another

   • No TDS is applicable.

   • This is not treated as a withdrawal, so it’s not taxable and need not be reported in your income tax return.

5. Withdrawal before 5 years, but due to specific reasons

   • If your employment ends due to ill health, business closure, or any reason beyond your control, there is no TDS.

   • The withdrawal is not taxable, and you are not required to report it in your tax return.

Conclusion 

These upcoming changes underscore a clear shift towards a more member-centric and technology-driven approach by the EPFO. For millions of salaried Indians, especially those in urgent need of funds, the increased auto-settlement limit could offer quicker and more convenient access to their hard-earned savings.

While official approval is awaited, the intent and direction of these policy enhancements reflect a broader commitment to digitisation, transparency, and efficiency within the social security framework.

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