Retired from your job? Guide to withdraw your EPF money and where to invest it

You have been contributing a part of your salary to the EPF scheme from the early years in the hope of getting a lump sum corpus at the time of retirement. The rules state that the full EPF amount consisting of employer’s and employee’s contribution as well as the interest accrued on it can be withdrawn only after the retirement age of 58 years. Though it can be withdrawn early also under particular situations, it is not encouraged to do so. Now that you have retired, the primary thing you should concern yourself with is how to withdraw the full amount shown in the EPFO passbook and what you should do with it. 

How to withdraw the EPF amount online?

With the amendments made by the EPFO, now an employee does not require the employer’s attestation in order to make either a partial or complete withdrawal. It can be done directly from the EPFO portal via EPFO UAN login, provided the employee’s UAN and Aadhaar are linked or seeded with each other. Earlier, Form 19, Form 31, and For 10C were used to make withdrawals. 

However, recently, the Composite Claim form has fully replaced all these forms. Before visiting the official website and doing EPFO UAN login, make sure that all your PF accounts are merged into one to ensure that all EPF balances showing in the EPFO passbook get added for calculation. 

Visit the official website of EPFO. Under the ‘Our Services’ tab, choose the employee section. After that, click the UAN member link that will direct you to the login page where you need your UAN and password. Fill in the necessary details and claim your EPFO amount. 

Withdrawal rules after retirement

  • As per the EPFO, when the employee retires at the age of 58, they are eligible to claim the final amount (including their own and employer’s contribution as well as the interest accrued) from their EPF account, shown in the EPFO passbook. Another condition under which they can do is when they retire early, but the claim won’t be considered until the person reaches 55 years of age. 
  • When you withdraw the entire amount after your retirement, it will be tax exempted. However, the interest earned on that amount after your retirement will be taxable. 
  • In case you do not withdraw your funds via EPFO UAN login or any other mode for three years, you have to pay tax on the interest earned.

Now that you have withdrawn a lifetime’s worth of savings from your EPF account via EPFO UAN login, you may be looking forward to a comfortable retirement. However, with limited savings, funding your expenses after retirement can be tricky. Here are some of the smart ways to use your EPF money: 

  • Invest in FD: FDs are your best investment avenues; they provide security, assured returns, and you can benefit from flexible tenor. Gains from FD are not affected by market forces, so you can rest assured that your principal amount remains intact. It is especially good for those people who are not tech-savvy and find it easy to track their interest via a passbook similar to the EPFO passbook. 
  • Invest in mutual funds and shares: After investing a portion of your EPF corpus on FDs, you can invest in market-linked securities like shares and mutual funds, which can help you gain from high-interest rates over a very short period. As per the experts, equities deliver higher inflation-adjusted returns if compared with other assets. Since these are high-risk options, it is important to balance the risk with low-risk investments. You could diversify across both large-cap as well as balanced funds that have some of such exposure, even in the case of monthly income plans. The idea here is to generate stable returns rather than focus on high but volatile returns hence staying away from thematic and sectoral funds, including mid and small caps. The income from debt funds gets taxed at 20 percent after indexation if held for a period of three years or above, irrespective of your tax bracket. 
  • Tax-free bonds: Issued directly by government-backed institutions such as Power Finance Corporation Ltd, National Highway Authority of India, Indian Railway Finance Corporation, NTPC, HUDCO, etc. Not available in the primary market, but you, however, can buy and sell them on stock exchanges as they are listed securities. A few things that one should always keep in mind before investing in tax-free bonds are: they are long-term investments maturing after 10-20 years, liquidity is low in these bonds, offer annual interest payout, not monthly payouts. The interest earned on them is tax-free. There is no (TDS) tax deducted at the source too. 
  • Build a safety net using senior citizens savings scheme: Probably the first choice of most retirees where you can invest a sum from Rs. 1000 to up to 15 lakh, this scheme offers you an interest rate of up to 7.4% and involves investing for 5 years. The scheme, as suggested by the name, is available only to senior citizens or early retirees & can be availed from either a post office or a bank by anyone above 60. Backed by the government, it is free from the influence of market forces. It comes with a five-year tenure period which can be further be extended by 3 years once the scheme matures. What’s more, the investment in SCSS is eligible for tax benefits under section 80C, and it also allows premature withdrawals.
  • Post Office Monthly Income Scheme (POMIS) Account: It is meant for those retirees who can invest for the long term as it comes with a five-year investment tenor with a maximum cap of Rs. 9 lakh and Rs 4.5 lakh under joint and single ownership, respectively. The interest rate is traditionally set in every quarter and is at present offered at 7.8 p.a payable monthly and credited directly to your savings account of the same post office. Unlike SCSS, it doesn’t qualify for any tax benefit, and the interest is fully taxable. 
  • Real estate investment: Investing in real estate can also be used to hedge against inflation and can provide you with a higher rate of return in comparison to FDs and mutual funds. Moreover, investing in real estate gives you more flexibility; you can buy more than one property and put them on rent. The property rates will continue to grow, which will give you more returns. 

Once you withdraw your entire corpus from the EPF portal via EPFO UAN login, investing that money in a profitable combination can easily help you finance your post-retirement life. Some of the aforementioned options can help you build your retirement portfolio with a mix of market-linked investments and fixed income options, thus providing you with a regular stream of income. 

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