Feb 212021

Tax on Interest on EPF Contribution exceeding Rs 2.5 Lakh

EPF/GPF Taxation

“No retro taxation on interest earned for EPF/GPF contributions of over Rs 2.5 Lakh


Interest of more than Rs 2.5 Lakh earned annually from contribution to Employees Provident fund (EPF) or Government Provident Fund (GPF) will not be taxed retrospectively, Expenditure Secretary TV Somanathan clarified.

Announcement was made at

Business Line webinar on “Decoding the Budget 2021-22”

The webinar was powered by HDFC Bank with BSE as as assosciate sponsor.

EPF Taxation

EPF is the only saving instrument where one gets tax emption at the time of contribution, then on the accumulation and, finally, at the time of withdrawal. This is called EEE (Exempt-Exempt-Exempt) mechanism.

Present Provisions

Presently, any payment received by an employee from his provident fund account is fully tax free. The payment received from the provident fund comprises of contribution made by the employer and the employee as well as the interest accrued on the contributions.

An employee is required to contribute 12% of his basic salary and dearness allowance towards employee provident fund account which is required to be matched by the employer by equal contribution. There is no such restriction on the employee contributing beyond 12% as voluntary contribution.


Since the interest on contribution made by an employee enjoys tax exemption without there being any upper limit,  the government has proposed that interest accrued in respect of employee’s  contribution in excess of Rs. 2.50 lakhs every year shall become taxable in the hands of the employee at normal rate. This will apply to the Employees Contribution and not that of the employer.

This will be effective on contributions made from April 1 2021, So the interest in respect of annual contribution of Rs. 2.50 lakhs only will come tax-free and any interest accrued on excess contribution shall become taxable in the hands of the employee year after year.

Additional Info – Exemption

  • GPF & EPF flows into an account above Rs 2.5 Lakh will be directed to a separate sub-account.
  • The primary account including your past balance as on March 31, 2021 will always remain tax free;
  • Interest will also not have to be declared.
  • PPF, EPF, VPF, Ulips are some of the Popular Tax Free Investment Option available to Investors.

However, the proposal may not face as big a backlash this time because it affects only the creamy layer of salaried employees. The Rs 2.5 lakh annual threshold means that a person contributing up to Rs 20,833 a month to PF (basic salary of up to Rs 1.73 lakh a month) will escape the tax. This means if your Monthly basic salary is above Rs 1.75 Lakh (just the basic salary and not your total monthly income), your monthly contribution will be above Rs 20835 which is Rs 2.5 lakh in a year, then the interest income earned on the exceeded amount is taxable.

For example, for someone with a Basic Salary of Rs 1 lakh, the monthly contribution is Rs 12,000 which is about Rs 1.44 lakh in a year. The employee contributes an additional 12 per cent into VPF taking the total contribution to Rs 2.88 lakh in the year. In such a case, the interest earned on Rs 38,000 (excess of Rs 2.50 lakh) will now get taxed.

The new PF contribution rules will not impact an employee whose monthly contribution is below Rs 20,833. However, if your Basic Salary is above Rs 1.75 lakh, there’s no escaping tax on interest earned.

In my opinion, since we do not have social security system in our country why should the government discourage anyone from contributing higher amount towards his retirement fund. The government should rethink on this proposal.

Thanks for Reading!!!!

Esha Agrawal
The author can be reached at eshaag6@gmail.com, for any queries feel free to contact.


May 212020

EPF Reduction in Percentage from 12 % to 10 %

It is brought to your kind notice that the Ministry of Labour & Employment, Govt. of  India has published a Gazette Notification (attached) bearing no.: S.O. 1513(E ) dated 18th May 2020 to further, provide liquidity in the hands of employers and employees as financial support due to COVID -19.

The followings are the important notes/information for your kind reference and consideration before taking/initiating any steps by covered ‘establishment/company/organization’ under the EPF & MP Act, 1952 to further seek the monetary benefits under the present scheme/notification:

  • That the said notification is not applicable on any establishment, other than Central Public Sector Enterprises and State Public Sector Enterprises and other establishments owned by, or under the control of the Central Government or the State Government, as the case may be, in respect of wages payable by it for the months of May, June, and July 2020
  • That any establishment shall not be eligible in case any establishments eligible for relief under the Pradhan Mantri Garib Kalyan Yojana guidelines issued by the Employees’ Provident Fund Organization vide its Office Memorandum No.C-1/Misc./2020-21/Vol.II/Pt. dated 9th April 2020 ”.
  • That the said monetary benefits scheme is presently applicable for limited wages period i.e. May paid in June, June paid in July and July paid in August 2020.
to wage month
April 2020
wage months
May 2020 to July 2020
Employee’s PF Contribution – A/c .No: 1

Employer’s PF Contribution – A/c. No: 1
Employer’s EPS Contribution – A/c. No: 10
EDLI Contribution – A/c. No: 21
Administrative Charges – A/c. No: 2
No change in inspection charges in A/c.No.22  in respect of EDLI exempted establishments


Keeping view of above and add to it, we have received many queries from employers and employees in respect on the followings in this regard EPFO has shared the respective Faq on the same

In the respective FAQ, many points are clear as per the queries received.

Now it is option to the company/Service providers ( Contractors)  to change the contribution rate from 12 % to 10 % as per the Management decision & Principal Employer  but I would suggest that there is no need to change the rate of contribution for the following reason

For example, if the monthly basic salary is Rs 30,000, the employee contribution towards his or her EPF would be Rs 3,600 a month (12 percent of basic pay), while the equal amount is contributed by the employer each month. If the contribution rate is reduced to 10 percent, Rs 3,000 a month becomes the PF contribution by the employee and the take-home pay will increase by Rs 600.

  1. Impact on CTC
    The employer’s contribution to EPF is a part of the CTC. As the employer is supposed to match the mandatory contribution rate, if it is reduced to 10 percent, the employer’s contribution to reduces. Thus, CTC too will see a fall, unless adjusted by the employer under some other head. Once adjusted and the employer decides to pay the 2 percent differential under some head, the take-home pay will increase, and for three months the workload of changing of CTC will also increase
  2. Impact on taxes saved.
    As per the above take-home increase, Your contribution towards PF qualifies for tax benefit section 80C of the Income-tax Act. If the proposals go through, lesser contributions will mean that much less of tax benefit. For example, if annual contribution towards PF falls by Rs 7,200, then for someone paying 31.2 percent tax (highest slab), then you will save nearly Rs 2,250 lesser tax. One can, however, invest in products like in ELSS to save tax up to Rs 1.5 lakh in a year
  1. Cumulative Interest Loss.

As EPF is on every month is giving Cumulative rate of Interest on a monthly basis if the contribution reduce Employee will be losing the Interest of three months which will be at a reduced rate, on both Employee Share & Employer Share.

From the above observation & referring to the Faq of the EPFO, I would suggest not to reduce the contribution rate as reducing the rate is not going to benefit either employee nor employer

Download Circular
Frequently Asked Questions

Courtesy : Prakash Consultancy Services


Apr 122018

Provisions in finance bill 2018 as to provident fund (Part 1 of chapter VIII):


Clause111. The provisions of this Part shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

Clause 112. In the Government Savings Banks Act, 1873 (hereafter in this Part referred to as the principal Act), for the long title, the following shall be substituted, namely:––

“An Act to regulate and channelise the savings from general public into Government Savings Schemes.”

Clause 3A. (1) The Central Government may, by notification in the Official Gazette, frame new Savings Schemes or amend or discontinue existing Savings Schemes to promote household savings in the country.

Clause 131. After section 15 of the principal Act, the following shall be inserted, namely:––

“16. (1) The Government Savings Certificates Act, 1959 and the Public Provident Fund Act, 1968 are hereby repealed.

(2) Notwithstanding such repeal and without prejudice to the provisions contained in the General Clauses Act, 1897, with respect to repeals––

(a) anything done or any action taken or purported to have been done or taken, including any rule, notification, order or notice made or issued or any direction given under the repealed enactments shall be deemed to have been done or taken under the corresponding provisions of this Act;

(b) subject to the provisions of clause (a), any instrument executed or certificate issued, or anything done under or in pursuance of any repealed enactment shall, if is in force at the commencement of Part I of Chapter VIII of the Finance Act, 2018, continue to be in force in so far as it could have been executed, or issued or done under or in pursuance of such Part, shall have effect as if the same has been executed, issued or done under or in pursuance of the provisions contained in the aforesaid Part;

(c) all deposits made or accounts or certificates held under the repealed enactments shall be deemed to be deposits or holdings in the Savings Scheme made under the corresponding provisions of this Act; and

(d) any proceeding under the repealed enactments pending immediately before the commencement of Part I of Chapter VIII of the Finance Act, 2018 before any court shall, subject to the provisions of this Act, continue to be heard and disposed of by the said court.

(3) The repeal shall not prejudicially affect the interest of depositors who, before the commencement of Part I of Chapter VIII of the Finance Act, 2018, made deposits or were issued certificates or made contribution to any scheme under the repealed enactments.

Meaning of existing saving schemes that will converted into Government Savings Promotion Act, 1873:

  1. Post Office Savings Account
  2. National Savings Monthly Income (Account)
  3. National Savings Recurring Deposit
  4. Sukanya Samridhhi Account
  5. National Savings Time Deposit (1 year, 2 years, 3 years and 5 years)
  6. Senior Citizens’ Savings Scheme
  7. Savings Certificates:—
    • Kisan Vikas Patra (discontinued from 1st December, 2011 and restarted from 23rd September, 2014);
    • National Savings Certificates (VIII Issue).
  8. Public Provident Fund Scheme.

Discontinued Savings Schemes:

  1. National Savings Scheme, 1987
  2. National Savings Scheme, 1992
  3. Block Deposit Account
  4. Defence Savings Account
  5. Gift Coupons
  6. Cumulative Time Deposit Accounts:— (a) 5-year account (b) 10-year account (c) 15-year account
  7. 5-year Prize Bonds
  8. 5-year Premium Prize Bonds
  9. 5-year Compulsory Deposit Account Scheme, 1963
  10. 5-year Fixed Deposit Account
  11. 5-Year Cash Certificates
  12. 10-Year Defence Savings Certificates
  13. 12-Year National Savings Certificates
  14. 7-Year National Savings Certificates
  15. 5-Year National Savings Certificates
  16. 10-Year Treasury Savings Deposits Certificates
  17. 15-Year Annuity Certificates (I series)
  18. 10-Year National Plan Savings Certificates
  19. 10-Year Treasury Savings Deposits Certificates
  20. 12-Year National Plan Savings Certificates
  21. 15-Year Annuity Certificates (II series)
  22. 10-Year Defence Deposit Certificates
  23. 12-Year National Defence Certificates
  24. 10-Year National Savings Certificates (I-Issue)
  25. 7-Year National Savings Certificates (Il Issue)
  26. 7-Year National Savings Certificates (III-Issue)
  27. 7-Year National Savings Certificates (IV-Issue)
  28. 7-Year National Savings Certificates (V-Issue)
  29. 12-Year National Savings Annuity Certificates
  30. 5-Year National Development Bonds
  31. 6-Year National Savings Certificates (VI-Issue)
  32. 6-Year National Savings Certificates (VII-Issue)
  33. 10-Year Social Security Certificates
  34. Indira Vikas Patras
  35. 10-Year National Savings Certificates (IX Issue).

Impact analysis:

  1. All deposits under existing saving schemes will automatically converted into and come under the Government Savings Promotion Act, 1873.
  2. Interest of existing customers’ are not prejudicially hearted in terms of interest rates and deduction from taxable income in computing tax bills.
  3. However, PPF currently enjoys the freedom from court attachment (but not attachment under any order of income tax and estate duty authorities), i.e., the balance to the credit of a subscriber in his account is not subject to attachment under any order or decree of a court in respect of any debt or other liability incurred by him. This provision may not exist as the PPF Act itself is being repealed.
  4. Furhter, information about above investment does not reach automatically to income tax department via AIR but henceforth since these come under Government Savings Promotion Act and hence criteria based information of above investment will reach to income tax department.
Dec 182017

Liability of employer for not deducting PF under Employer Provident Funds and Misc. Provisions Act, 1952

  1. Liability to deduct PF on overtime:

For ascertaining whether to deduct PF on particular component of Basic Wages one has to determine:-

Whether the payment which has been made to a workman / employee in respect the period which does not fall within normal duty hours or within over time hours would be said to be overtime allowance or is a payment of similar nature to fall within the category of similar allowance payable.

Over time allowance as generally understood and defined under factories act 1948 means working in a factory for more than 9 hours in any day or for more than 48 hours in any week, and shall, in respect of overtime work, be entitled to receive wages at the rate of twice his/her ordinary rate of wages. Further, no worker can work more than 10-1/2 hours a day. In essence, worker working more than 48 hours in a week shall be paid overtime with the rate of double wages and further overtime hours can not in any case exceed 24 hours in a week.

The PF is deductible on all emoluments which are earned by an employee while on duty excluding specifically overtime. As mentioned above overtime could only limited within the range of 48 hours in week to 72 hours work in a week. [1 week = 6 days]

Any payment to worker for work more than 72 hours is not overtime and hence PF deduction liability is not applicable on the same.

  1. PF is not liable to be deducted on salary / wages payable to trainees:

In industries it is observed that trainees are deployed within the floor of industry and skilled and developed workmen is again kept on permanent pay roll of the industry. In such cases PF is not deducted on whatever amount is being paid to such trainees if following conditions are met:

  1. Training has been introduced with a view to impart training to persons with specified qualifications.
  2. Minimum qualification and training period has to be mentioned in the training scheme. However, manager may reserve its right to determine the period of training to a particular trainee if they find that there is no proper response from the trainees.
  3. Trainees are being paid a consolidated stipend. This may increase year after year during the period of training.
  4. No other benefit, except for stipulated stipend, shall be paid to such trainees.
  5. Trainees should be recruited for a specified period under the scheme.
  6. There should not be any guarantee for their employment in the company after the completion of their training period.
  7. Training may be terminated at any time without any notice or reason if trainees are found to be medically unfit or unable to accommodate with training environment.

  1. Non-payment of contribution – Recovery can’t be done from director working in the professional capacity:

In case director was not in the position to control financial and managerial aspect of the company, it is wrong to enforce recovery from such director for the default made by the company.

Sep 262015

In a recent Judgment passed in 2015 LLR 893 MADRAS HIGH COURT Hon’ble Mr. V. Ramasubramanian, J. Hon’ble Mr. P.R. Shivakumar, J. W.A. Nos. 463 to 465/2013, D/–13-3-2015 Bharat Sanchar Nigam Limited vs. Union of India and Others , Employees except apprentices under Apprenticeship Act will be covered by the Provident Fund Act

Important synopsis of the said Judgement

  • The provisions of Employees’ Provident Funds and Miscellaneous Provisions act, 1952 include every person including apprentices or trainees within the purview of definition to the expression ‘employee’ except those engaged under the Apprentices Act, 1961.
  • Employer is also liable to pay EPF contributions in respect of Pre-Induction Training period of the trainees.

I am enclosing herewith the judgment copy for your kind perusal

Employees except apprentices under Apprenticeship Act will be covered by the Provident Fund Act

Courtesy: Prakash Consultancy Services

May 132015

Taxability of Provident Fund

Employees’ provident fund

Provident fund scheme is as a retirement benefit scheme. Under this scheme, a stipulated sum is deducted from the salary of the employee as his contribution towards this fund. The employer also generally contributes simultaneously an equal amount out of its pocket to the fund.

The contributions of employee and employer are invested in gilt-edged securities. Interest earned thereon is also credited to the provident fund account of employees. Thus, the credit balance in the provident fund account of an employee consists of employee’s contribution, interest on employee’s contribution, employer’s contribution and interest on employer’s contribution. The accumulated sum is paid to the employee at the time of his retirement or resignation.

In the case of death of an employee, the accumulated balance is paid to his legal heirs. Since the scheme encourages personal saving at micro level and generates funds for investment at macro level, Government provides deduction under section 80C.

Types of provident funds

  • Statutory provident fund.
  • Recognised provident fund.
  • Unrecognised provident fund.
  • Public provident fund

STATUTORY PROVIDENT FUND – Statutory provident fund is set up under the provisions of the Provident Funds Act, 1925.This fund is maintained by the Government and semi-Government organisations, local authorities, railway, universities and recognised educational institutions.

RECOGNISED PROVIDENT FUND – A provident fund scheme to which the Employee’s Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as PF Act,1952) applies is recognised provident fund.

As per PF Act,1952 any establishment employees 20 or more person is covered by the PF Act,1952(establishment employing less than 20 persons can also join the provident fund scheme if the employees want to do so). A establishment covered by the Pf Act, 1952 has the following two alternatives

Alternative available schemes Additional formalities to get approval of the Provident Fund Commissioner Status for income-tax purpose
1.Scheme of the Government set up under the PF Act,1952 No Such provident fund is recognised provident fund
2.Own scheme of provident fund A trust has to be created by the employer and employees to start own provident fund scheme.Funds shall be invested in accordance with the rules given under PF Act,1952. If the scheme satisfies certain rules given under PF Act,1952. It will get the approval of the PF Commissioner It is the recognised by the Commissioner of Income-tax in accordance with the rules contained under Part A of the Fourth Schedule to the Income-tax Act, it becomes recognised provident fund 

UNRECOGNISED PROVIDENT FUND – If a provident fund is not recognised by the Commissioner of Income-tax, it is known as unrecognised provident fund.

PUBLIC PROVIDENT FUND – The Central Government has established the public provident fund for the benefit of general public to mobilise personal savings. Any members of the public (whether a salaried employee or a self-employed person) can participate in the fund by opening provident fund account at any branch of the State Bank of India or its subsidiaries or a few nationalised banks.

A salaried employee can simultaneously become a member of employees ‘provident fund(whether statutory recognised or unrecognised) and the public provident fund. Any amount (subject to minimum of Rs. 500/- and maximum of Rs. 1,50,000/- per annum) may be deposited in this account. The accumulated sum is repayable after 15 years (it may be extended). This provident fund, at present, carries compound interest (tax-free) at the rate of 8.7% per annum.Interest is credited every year but is payable only at the time of maturity.

Tax treatment

  Statutory provident fund Recognised provident fund Unrecognised provident fund Public provident fund
1 2 3 4 5
Employer’s contribution to provident fund  Not treated as “income”of the year in which contribution is made Not treated as “income”up to 12 %of salary. Excess of employer’s contribution over 12%of salary is taxable Available Not treated as “income” of the year in which contribution is made Employer does not contribute 
Deduction under section 80C on employee’s contribution Available 




Not available 




Interest credited to provident fund 


Not treated as income of the year in which interest is credited  Not treated as “income” If the rate of interest does not exceed the notified rate of interest (i.e.,9.5%) of excess of interest over the notified rate is however,taxable Not treated as income of the year in which interest is credited


Exempt from tax


Lump sum payment at the time of the retirement of service Exempt from tax Exempt from tax in some cases. When not exempt provident fund will be treated as an unrecognised fund from the beginning See note 3 Exempt from tax


  1. Accumulated balance payable to an employee participating in a recognized provident fund shall be exempt in the hands of employee in the following situations-
  • If the employee has rendered continue service with his employer for a period of 5 years or more.
  • If the employer has been terminated because of the certain reason which are beyond his control (e.g., ill health of the employee, discontinuation of business by employer, completion of project for which the employee was employed, etc.).
  • If the employer has resigned before completion of 5 years but he joins another employer (who maintains recognized provident fund and provident fund money with the current employer is transferred to the new employer).
  1. Lump sum payment received from unrecognized provident fund at the time of retirement/termination shall be taxable as follows-
  • Payment received in respect of employer’s contribution and interest thereon is taxable under the head “Salaries”
  • Payment received in respect of interest on employee’s contribution is taxable under the head ”Income from other sources”.
  • Payment received in respect of employee’s contribution is not chargeable to tax.
  1. If the accumulated balance becomes taxable due to non-fulfillment of the aforesaid conditions, the total income of the employee will be recomputed by the Assessing Officer, as if the fund was not recognised from the beginning.
  2. Interest credited to recognised provident fund is exempt from tax.
May 042015

TDS on withdrawal of fund from Employees Provident Fund

Meaning of Recognized Provident Fund

Under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952), certain specified employers are required to comply with the Employees Provident Fund Scheme, 1952 (EPFS). However, these employers are also permitted to establish and manage their own private provident fund (PF) scheme subject to fulfillment of certain conditions.

The provident funds established under a scheme framed under EPF & MP Act, 1952 or Provident Fund exempted under section 17 of the said Act and recognised under the Income-tax Act are termed as Recognised Provident fund (RPF) under the Act.

System of taxation of RPF

Under existing rule of income tax act, the withdrawal of accumulated balance by an employee from the RPF is exempt from taxation.

However, if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc.) and does not opt for transfer of accumulated balance to new employer same is taxable.

Computation of income for TDS

For ensuring collection of tax in respect of these withdrawals, rule 10 of Schedule IV-A provides that the trustees of the RPF, at the time of payment, shall deduct tax as computed in rule 9 of Schedule IV-A.

Rule 9 of Schedule IV-A of the Act provides that the tax on withdrawn amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund.

Existing difficulty

However, at times, it is not possible for the trustees of EPFS to get the information regarding taxability of the employee such as year-wise amount of taxable income and tax payable for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Act.

Amendment made in Finance Act 2015

It is, therefore, proposed to insert a new provision in Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS.

Highlights of amendment:

  • For benefiting employees having taxable income below the taxable limit, a threshold limit of Rs.30,000/- for applicability of this proposed provision is provided in the act.
  • For reducing the compliance burden of employees further, the facility of filing self-declaration for non-deduction of tax under section 197A of the Act shall be extended to the employees receiving pre-mature withdrawal.
  • An employee can give a declaration in Form No. 15G to the effect that his total income including taxable pre-mature withdrawal from EPFS does not exceed the maximum amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted by the trustee of EPFS while making the payment to such employee
  • Similar facility of filing self-declaration in Form No. 15H for non-deduction of tax under section 197A of the Act shall also be extended to the senior citizen employees receiving pre-mature withdrawal.
  • However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer or through payment of advance tax / self-assessment tax.
  • For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite.
  • In order to ensure the collection of balance tax by employees falling under 20% or 30% slab rate, it is also proposed that non-furnishing of PAN to the EPFS for receiving these payments would attract deduction of tax at the maximum marginal rate.
  • These amendments will take effect from 1st June, 2015.

Extracts of amendments

41. After section 192 of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2015, namely:—

“192A. Notwithstanding anything contained in this Act, the trustees of the Employees’ Provident Fund Scheme, 1952, framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or any person authorised under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax thereon at the rate of ten per cent.:

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than thirty thousand rupees:

Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.

May 012015

PPF – Loans and Withdrawals

Different between Loan and Withdrawal

Loan From PPF
Withdrawal of PPF amount
  • Needs repayment
  • Burden of interest payable
  • Impacts future loan eligibility
  • Impacts credit ratings
  • Repayment is not required
  • Impacts interest income in future

When to withdraw money / take loan

You should avail such loans / withdrawal facilities only when you are falling short of your finance and do not have any other option to achieve an important life goal such as child’s higher education or daughter’s marriage etc.

Such loans should not be availed to improve your life style or to buy a costly gadget. After all, this is the money that you have kept aside for your retirement.

Extracts of rules facilitating loan from PPF account

The PPF rulebook states it as follows:

“Notwithstanding the provisions of paragraph 9, any time after the expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made, a subscriber may, he so desires, apply in Form D or as near thereto as possible, together with his pass book to the Accounts Office for obtaining loan…”

Who can avail loan facility

You can take a loan from the fund in case of need. You don’t have to wait till you become eligible for withdrawals from the account.

In simple terms, the following are the steps to see how much loan you can avail.

  • Say you opened your PPF account in August 2014.
  • The end of the financial year when the initial subscription was made is March 31, 2015.
  • The expiry of one year from the end of that financial year is March 31, 2016.
  • So from March 31, 2016, until 5 years from March 31, 2015, that brings us to March 31, 2020, you are entitled to apply for a loan against your PPF balance.

Therefore to simply put, from the second year of opening the PPF account to the sixth year, as a PPF account holder you can take a loan

How much loan you can take is defined as follows:


“… A subscriber may, he so desires, apply in Form D or as near thereto as possible, together with his pass book to the Accounts Office for obtaining loan consisting of a sum of whole rupees not exceeding twenty five per cent of amount that stood to his credit at the ends of the second year immediately preceding the year in which the loan is applied for.”

However, the loan has to be repaid with interest at 2% per annum within 36 months, either in lump-sum or in installments.

It is noteworthy that now for a loan taken by the subscriber of a PPF account on or after December 1, 2011 a rate of interest of 2% per annum is levied.

You can take a second loan against your PPF account before the end of your sixth financial year, but your second loan can be taken only once your first loan is fully settled.

 Withdrawals from my PPF account

Yes, you can make one withdrawal per year starting from your seventh year (through an application vide Form C). The first withdrawal can be done after the expiry of 5 full financial years from the end of the year in which your initial subscription was made.

The amount of withdrawal will be limited to 50% of the balance at credit at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn, or the balance at the end of the preceding year, whichever is lower, as per the PPF rulebook.

Thereafter, you can make one withdrawal per year.


if you opened your PPF account on April 1, 2014, you can make your first withdrawal after April 1, 2020, and the amount of withdrawal will be limited to 50% of the balance as on – March 31, 2016, or the balance as on – March 31, 2019, whichever is lower; subject to loan taken on your PPF account.

Apr 302015

Union cabinet approves continuation of minimum pension of Rs 1,000 per month

The Union cabinet on Wednesday approved continuation of the minimum pension of Rs 1,000 per month beyond 2014-15 on a perpetual basis, benefiting about 20 lakh retirees covered under the pension scheme run by the Employees’ Provident Fund Organisation. Providing a minimum pension of Rs 1,000 per month is an effort to provide meaningful subsistence to pensioners who have served in the organized sector,” the government said in a statement.

The cabinet also approved Rs 850 crore per year grant to meet the liability on a tapering basis, it said.

The Employees’ Pension Scheme, 1995 (EPS), which was effective from September 2014, had expired on March 31, 2015, after which EPFO had restored to the earlier provision that had led to widespread protests from trade unions.

The UPA-II government had in February 2014 accorded approval to the proposal for ensuring a minimum pension of Rs 1,000 per month for the pensioners of EPS for 2014-15 and provided a budgetary support of Rs 1,217.03 crore.

However, the proposal could only be implemented by the BJP-led NDA government with effect from September 1 last year after necessary amendments to the EPS Act.

reproduced from economic times