EPFO to Increase Auto Settlement Limit to Rs 5 Lakh: Learn What This Means for You

However, while the organisation's objectives are commendable, EPF subscribers have historically been plagued by delays and bureaucratic hurdles in accessing their own hard-earned money.

Recognising these pain points, the EPFO and the government have taken several steps in recent years to enhance 'Ease of living' for more than 7.5 crore EPF subscribers.

One of the most welcome moves was the introduction of the auto mode of claim settlement in April 2020 for the purpose of advance for illness.

The entire auto-settlement process is driven by an IT system, removing the need for human involvement. Claims that meet KYC requirements, eligibility criteria, and bank account validation are automatically processed for payment by IT tools.

This automation has significantly reduced the claim settlement time - from the earlier 10 days to just 3-4 days for eligible advances. Moreover, claims that do not pass system validation are not immediately rejected or returned. Instead, they undergo a secondary level of scrutiny and approval.

The auto mode has since expanded to include education, marriage, and housing needs.

Back in May 2024, EPFO doubled the claim limit from Rs 50,000 to Rs 1 lakh. Previously, members had to wait for manual verification to withdraw advance amounts exceeding Rs 1 lakh, which was not ideal during urgent situations such as medical emergencies.

With these changes, EPFO processed a record 2.16 crore auto-claim settlements this financial year (as of March 6, 2025), marking a significant increase from 89.52 lakh in 2023-24.

95% of claims are now being settled automatically within 3 days, reflecting the growing efficiency of the system. Rejection rates have also seen a notable decline - from 50% to 30%.

In its efforts to further streamline operations, EPFO has reduced the number of validation requirements for PF withdrawals from 27 to 18.

Now, in a significant move to further enhance ease of living, EPFO is expected to increase the auto-settlement of advance claims (ASAC) limit by fivefold, from the current Rs 1 lakh to Rs 5 lakh.

This can significantly benefit those who have higher PF balances and need to withdraw funds urgently (for whatever reason/s).

According to media reports, Ms Sumita Dawra, Secretary, Ministry of Labour and Employment, approved the proposal during the 113th meeting of the Executive Committee (EC) of the Central Board of Trustees (CBT), held on March 28, 2025.

Once CBT approves the proposal, EPF members will be able to withdraw up to Rs 5 lakh through ASAC.

However, it should be noted that subscribers still need to fulfil certain requirements for partial withdrawals.

For instance, members can withdraw up to 50% of their PF balance (with the condition that a minimum of 7 years of service should be completed) for specific purposes such as marriage and education. For medical purposes, the withdrawal limit is up to 6 times the monthly basic pay (without any restriction on years of service completed).

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With the revised Rs 5 lakh limit for advance withdrawals, any claim falling within this approved threshold will be processed automatically by EPFO without manual approval.

All subscribers need to do is make sure that their KYC is updated and crucial documents such as Aadhaar and PAN cards are linked to their EPF account.

Other Recent Developments to Streamline EPF Claims

1. UPI-Based PF Withdrawals

In another significant development, EPFO is set to roll out Unified Payments Interface (UPI) transactions for PF withdrawals. Once in place, this feature will allow members to withdraw their funds directly via UPI platforms and ATMs, bypassing conventional banking channels.

The adoption of UPI-based withdrawals may also set the stage for similar enhancements in other savings schemes, such as the General Provident Fund (GPF) and the Public Provident Fund (PPF).

[Read: EPFO Reform: Subscribers May Soon Withdraw PF via ATMs]

2. No Need for Uploading Cancelled Cheques or Employer Verification of Bank Accounts

In a move that is expected to bring major relief to employees, EPFO has eliminated the requirement to upload cancelled cheques and employer verification for bank accounts while applying for online withdrawals.

Presently, banks take an average of 3 days to complete verification for bank account seeding requests. However, employer approval delays tacked on an additional 13 delays, leading to a backlog of pending approvals.

The removal of these steps aims to delays caused by employer intervention and poor-quality document uploads that led to claim rejections.

Further, EPF members can now update their linked bank account by entering their new account number and IFSC code, which will be verified through Aadhaar-based OTP authentication.

Initially rolled out as a pilot project on May 28, 2024, for select KYC-updated members, these changes have already benefited 1.7 crore EPF subscribers. Following its success, EPFO has now extended the relaxation to all members.

This initiative will provide immediate relief to over 14.95 lakh EPF members awaiting employer approval for bank verification, allowing quicker access to their funds.

Other key EPFO guidelines subscribers should be aware of to make the most of member benefits include:

• Simplification in the process of submitting Joint Declaration (JD) requests (submitted by an employee and their employer to correct discrepancies in personal details such as name, date of birth, or gender in EPFO records) based on members' Aadhaar verification status and UAN generation date.

• Provision to update EPF member profile details without submitting any documents, subject to certain conditions.

• Elimination of the requirement to route online transfer claims in case of a change of jobs through the previous or current employer, in most cases.

• Introduction of a Centralised Pension Payment System (CPPS) for pensioners to access their pensions easily from any bank, at any branch, across the country - without the need for physical verification visits.

[Read: 5 New EPFO Guidelines You Need to Know in 2025]

Is Withdrawing from EPF a Prudent Move?

While easier access to PF money is a positive development, it is important to remember that EPF is primarily meant for retirement savings.

Frequent withdrawals can significantly reduce the amount accumulated for retirement, potentially affecting your financial security in later years.

Moreover, EPF contributions earn compound interest over time. Withdrawing funds prematurely interrupts this growth, leading to a smaller corpus.

You should consider withdrawing PF only during genuine emergencies, such as medical treatment or job loss.

It's also advisable to build a separate emergency fund and tap into your PF savings only if absolutely necessary.

To Conclude...

From increased auto-withdrawal limits to simplified claim processes, EPFO's latest reforms reflect their commitment to facilitating greater convenience and accessibility for millions of members.

While the reforms are expected to ease access to funds during times of need, EPFO subscribers must take care to use this facility judiciously to protect long-term retirement savings.

Be thoughtful in your approach.

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Hiral Bhuta is a Investment Consultant & Principal Officer. She is a seasoned professional in the financial services industry, currently serving as an Investment Advisor and Financial Planner at PersonalFN. With her expertise, she plays a pivotal role as the Principal Officer appointed under SEBI's amended IA Regulation. Hiral holds distinguished certifications such as Certified Financial Planner (CFP) and NISM XA & XB, complemented by a post-graduate degree in commerce (M. Com). Her primary areas of focus encompass financial planning, investment advisory, and wealth management, where she leverages her knowledge and skills to provide tailored solutions to clients. With a cumulative experience spanning five years, Hiral brings a wealth of expertise and insight to her role at PersonalFN, ensuring clients receive expert guidance and support in navigating their financial goals.
 

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.