The Employee Provident Fund (EPF), or provident fund as it is normally referred to, is essentially a retirement saving plan that is available to salaried employees.

Therefore, withdrawing money from one’s PF account is not advisable, unless in case of extreme emergency.

However, if there is no other option but to withdraw the amount standing to your credit in the EPF account, then you can do so under certain circumstances.

One, on retirement from service after attaining the age of 55 years. Thus, if you are a member of the PF, you can withdraw full amount at the credit in the fund on retirement from service after attaining the age of 55 years.

Two, full amount in provident fund can also be withdrawn by the member if the member is retired on account of permanent and total disablement due to bodily or mental infirmity.

Three, it can also be done immediately before migration from India for permanent settlement abroad or for taking employment abroad.
Four, in the case of mass or individual retrenchment.

Five, on termination of service under a voluntary scheme of retirement framed by the employer and the employees under a mutual agreement.

Six, on ceasing to be an employee in any establishment to which the PF Act applies provided he/she does not take up employment in any establishment to which the Act applies for a continuous period of not less than two months immediately preceding the date on which he/she makes an application for withdrawal.

For withdrawing the amount, an application for withdrawal of provident fund contribution has to be made in Form 19, to be furnished manually, specifying therein personal details of employee, details of employer, period of employment and contribution made for the current financial year.

Besides, a cancelled cheque of the bank account maintained in India from the expatriate in order to verify the bank account details also need to be submitted.

It, however, need to be noted that the withdrawal of PF contribution is not tax-free in all the cases. In fact, tax implications would arise if the amount standing to the credit in the EPF account is withdrawn by the employee before rendering 5 years of continuous service.

In case the employee has rendered less than 5 years of continuous service, the refund of employer’s contribution and the interest thereon would be fully taxable as salary income. The employee’s contribution would be taxable as salary income to the extent of deduction claimed, if any under the Income-tax Act. The interest earned on employee’s total contributions would be taxable as income from other sources in the hands of the employee.

However, in case the employee has rendered more than 5 years of continuous service (service period includes period with last employer and previous employers), the entire accumulated balance received by an employee would be exempt under Indian tax laws.

The government has recently released the Draft Direct Tax Code (DTC) for public discussion which is expected to replace the existing Income-tax Act, 1961 effective April 2011. Under the draft DTC, Provident Fund may come under the EET model of taxation and thus withdrawal of accumulated Provident Fund would be fully taxable. However, the code provides that withdrawal of any amount of accumulated balance as on March 31, 2011 in the account of individual in the Employees’ Provident Fund will not be subject to tax.

Whatever be the case, it must be understood that EPF is not a saving or investment avenue, but essentially a retirement benefit scheme that is available to salaried employees.

Thus, on termination of employment, instead of withdrawing provident fund contribution, it would be better if the employee gets the accumulated balance in his PF account transferred to the PF account with the new employer.

And in any case, it may not be wise to withdraw the PF contribution before rendering 5 years of continuous service