EPFO Rules: Why It Mandates A Minimum 25 Per Cent Balance In EPF Accounts

The retirement planning landscape is undergoing significant changes with the implementation of the Employees’ Provident Fund Organisation’s (EPFO) updated provident fund, pension, and insurance schemes aligned with the new labour codes. One significant change that has been introduced in the Employees' Provident Fund (EPF) Scheme, 2026, is the mandatory requirement of maintaining a minimum 25 per cent balance in the EPF account.

Under the previous EPF 1952 scheme, a subscriber was allowed to withdraw the full amount for certain purposes, subject to completion of due operational formalities. Now, the rules mandate EPF subscribers to maintain at least 25 per cent of the total accumulated funds in the account, while the remaining 75 per cent of the funds can be withdrawn for permitted purposes, including medical treatment, education, housing, etc.

While it has extended auto-claim settlement for partial withdrawal for claims up to Rs 5 lakh, offering operational convenience to subscribers, the minimum balance requirement is the rule to ensure that their savings, which are meant for retirement years, do not get depleted in the face of pressing immediate needs.

EPFO has observed a concerning trend in subscriber behaviours, reported by the Business Standard. EPFO found that nearly 50 per cent (48.7 per cent) of all subscribers have only between Rs 10,000 and Rs 20,000 remaining in their accounts at the time of final settlement.

It shows their retirement savings are not adequate for their sustenance. Noticing this trend, the new rule of mandatory minimum balance of 25 per cent, even after partial withdrawal, was introduced. Reportedly, EPFO estimates that due to this rule, an employee with a Rs 15,000 monthly earning over a 20-year period could help the employee accumulate around Rs 14 lakh, even if the maximum limit of partial withdrawal is used.

According to the EPFO, this measure alone is expected to increase the retirement corpus by 7 to 35 times for around 50 per cent of its subscribers.

As per the new rules, EPF subscribers can access their provident fund savings after completing just 12 months of service for critical needs, such as medical issues, education, housing, marriage, and any other special category needs. EPFO has simplified the overlapping 13 categories of partial withdrawals into three, making it easy to understand the withdrawal category and claim an advance. However, for some subscribers, this minimum balance restriction also limits the liquidity that used to be available to them.

On the other hand, permitting 75 per cent of the accumulated fund withdrawal just after 12 months of service offers them flexibility to fall back on the EPF amount to meet their urgent needs. But, it also puts more responsibility on the subscribers to realise the power of compounding and put in efforts to build up this fund for their old age, while simultaneously planning for essential and urgent needs.