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Pension Withdrawal: The Detailed Guide

Pension Withdrawal

The Government of India unveiled the Employee Pension Scheme in 1995 to provide pension benefits and social security to the employees of the organised sector. The Employee Provident Fund Organisation (EPFO) administers the scheme, and it is available to all the employees eligible for the Employee Provident Fund. The EPS helps provide a steady income after retirement, so it is essential to know about the withdrawal process of the pension.



Features of the Employee Pension Scheme

  • The scheme offers pension benefits to the employee after the age of 58 years and ten years of service.

  • The employee and the employer make an equal contribution of 12% of the employee’s basic pay and dearness allowance under the EPF.

  • The employee’s contribution goes toward the EPF, while the employer’s part is contributed to the EPS at the rate of 8.33%. The government of India also contributes 1.16%.

  • To avail of the pension, you must be a member of the EPFO and earn less than INR 15000. However, if you earn more than ₹15000, you can voluntarily enrol under the EPS.

  • EPS involves risk-free guaranteed1 returns as it is a government initiative.

  • The least pension amount provided upon retirement under the EPS is INR 1000.


Pension Withdrawal Rules

To withdraw the pension amount, you must have worked for a minimum of ten years and must be 58 years old. However, you can avail of early pension fund withdrawal at the age of 50 years at a reduced rate of interest. But if you defer pension withdrawal until the age of 60 years, you benefit from an extra interest rate of 4% in a financial year.



Calculation of Pension

The calculation formula of the pension

The pension amount depends on your salary and the service years. The calculation formula of the pension is: EPS= Pensionable salary*service period/70

Pensionable salary: It is the average salary plus the dearness allowance you earned in the last twelve months.

Service period: The service period is the entire period of your employment after 15th November 1995, irrespective of changes in employment.



How to Withdraw PF Contribution?

The two ways in which you can withdraw your EPF pension are as follows:

PF pension withdrawal by using the Aadhaar card

  • First, activate your Universal Aadhaar Number at the EPFO website.

  • After the activation, fill in the Aadhaar and the bank details on the portal.

  • Submit Form 11 to the employer with the correct details.

  • After this, submit the composite claim form at the EPFO office with a cancelled cheque.


PF pension withdrawal without using the Aadhaar card

  • For pension withdrawal without the Aadhaar card, you need to fill and attach two form copies of 15G or 15H.

  • If the working period is lower than five years, you must provide your PAN details.

  • Instead of the UAN, you can withdraw your pension using the PF number.

  • After giving the above details, submit the composite claim form (Non-Aadhaar) at the EPFO office.


Pension withdrawal online

To withdraw your PF pension online without any hassle, you can follow the steps below:

  1. Log in to the UAN portal.

  2. Click the “Online Services” tab.

  3. Select “Claim Form-31,19 & 10C”.

  4. You will see member details. Enter the last four digits of your account number for verification.

  5. Click yes, sign the certificate and select “Proceed for Online Claim”.

  6. Select PF Advance (Form 31).

  7. Select the withdrawal purpose and the amount. Also, you need to give address details.

  8. Apply by clicking on the tick.

  9. Upload two scanned photographs and a PAN card.

  10. After the approval of the request by your employer, you can withdraw the PF pension.


Pension Withdrawal Under Different Circumstances

You can withdraw pension contributions according to your needs. The procedures to withdraw pension under different situations are as follows:

  • Before a working period of ten years: For pension contribution withdrawal before ten years in service, submit the filled composite claim form and select the options of final PF balance and pension withdrawal.

  • After working above ten years: Under this situation, withdrawal of the EPS amount is not allowed until you turn 58. You have to fill out the composite claim form and form 10C for the scheme certificate. You can avail of the pension once you turn 58 years old.

  • Between 50-58 years of age and ten years of working: Under this scenario, you can avail of the early pension by filling out form 10D and the composite claim form.

  • After 58 years of age: Once you turn 58 years old, pension withdrawal becomes easy and requires filling out form 10D, after which you can avail of the benefit.


When Can You Withdraw Your PF Balance?

According to the Employee Pension Scheme, 1952, you are eligible to withdraw the entire PF amount and the EPS once you retire and turn 58 years old.



Tax* Provisions On EPS Withdrawal

The lump-sum amount withdrawn under the EPS is taxable* under the Income Tax* Act,1961. Also, if you withdraw before the age of 58 years, no tax* is levied on the initial 25% while the remaining part is taxable*. However, this may depend on your salary and circumstance.

Also, many individuals neither withdraw the PF nor transfer it to their new employer, assuming the funds are safe, giving tax*-free returns. However, the Income Tax* Appellate Tribunal ruled in 2017 that the interest earned on the EPF funds is taxable* after you leave the job. So, you must withdraw your PF amount or transfer it to your new employer.



Conclusion

EPS provides ample benefits when you retire. You can use the pension amount to spend the golden years of your life stress-free and happily. Moreover, the pension takes care of your loved ones in your absence. So, if you are not enrolled in the EPS, you must start investing in a pension plan today to ensure financial security during old age.

With Tata AIA Life, you can buy the right retirement plan for yourself with adequate customisation options. You can choose from an annuity, guaranteed1 returns and pension plans to spend a stress-free post-retirement period. So, start investing in Tata AIA insurance plans to financially secure your family in case of an eventuality, fulfil your goals and create a retirement corpus.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry