Your PF When You Leave a Job: the Two-Month Rule Stopped Being the Rule in July

Almost everything written online about taking money out of your provident fund describes a scheme that no longer exists. The Employees’ Provident Funds Scheme, 1952 was superseded on 1 July 2026 by a new Scheme notified under the Code on Social Security. The withdrawal rules were rewritten in the process, and the rule most often quoted, that you can empty your PF account after two months without a job, is no longer the general rule.

It is now twelve months. That single change is buried in a sub-paragraph of a 90-page gazette notification, and it is the difference between planning a job gap around two months of waiting and planning it around a year.

What follows is the current position, read from the notification itself, covering the questions people actually arrive with: when the whole balance is payable, what you can take out while still employed, what happens to the money when you switch jobs, how to read a passbook and repair a missing month, and where the pension and gratuity thresholds sit.

What changed, and why most guidance has not caught up

The Ministry of Labour and Employment issued G.S.R. 525(E) on 29 June 2026, in exercise of powers under section 15(1)(a) of the Code on Social Security, 2020, superseding the 1952 Scheme. It was published in the Gazette of India Extraordinary on 1 July and came into force on publication.

Supersession is not amendment. The thirteen separate advance provisions of the old Scheme were replaced wholesale, the numbering changed, and the conditions attached to full withdrawal were rewritten. Guidance written against the 1952 paragraph numbers is not slightly out of date. It describes a different instrument.

The other reason the error persists is that the 1952 two-month rule still exists in the new Scheme. It just applies to far fewer people than it used to, which is a harder thing to notice than a rule being deleted.

When the whole balance is payable

Paragraph 49 sets this out, and it splits into two very different routes. Sub-paragraph (1) lists circumstances in which a member may withdraw the full amount standing to their credit. Sub-paragraph (2) covers everything else, which in practice means ordinary resignation.

Two details in that table are worth drawing out because they are easy to miss and they matter to real people.

The age-55 route has a proviso that works in the member’s favour. Someone whose service ends before they turn 55 is still entitled to the full balance if they reach 55 before the payment is authorised. The clock that matters is the authorisation date, not the date you stopped working.

The incapacity route is wider than it reads. The Scheme deems a member suffering from tuberculosis, leprosy or cancer to have been permanently and totally incapacitated for work, and it does so even where the illness was contracted after leaving the establishment, so long as it was before payment was authorised.

The twelve-month rule, in the Scheme’s own words

Paragraph 49(2) is the one that catches most people, because most people leave a job by resigning rather than by retrenchment or retirement. It lets the Commissioner permit a full withdrawal on ceasing to be an employee, and then attaches this condition:

Provided that a member shall not be eligible to withdraw unless the member has not been employed in any factory or other establishment to which the Code applies for a continuous period of not less than twelve months immediately preceding the date of application for withdrawal.

Read it carefully, because the drafting is doubled back on itself. You qualify only if you have been out of covered employment for a continuous twelve months before you apply. Joining a covered employer at month ten restarts that count. The condition is about the twelve months immediately preceding the application, not about twelve months at any point.

There is one carve-out, and it is narrow. The waiting period does not apply to female members who resign for the purpose of getting married. That exception was carried over from the old Scheme, and it remains the only one in the sub-paragraph.

The practical consequence is that for anyone moving between jobs normally, the full balance is not available at all. Partial withdrawal is the route, and transfer is the default.

Partial withdrawals, and the balance you cannot touch

Paragraph 46 replaced the old list of thirteen purposes with a much shorter set of heads, and loosened the conditions considerably while adding one new restriction.

Housing withdrawals, under 46(3), cover buying a flat or house, buying a site to build on, building, repaying a home loan taken for any of those, and additions, alterations, renovations or improvements to a house or flat you already have. The limit is up to a hundred per cent of what the Scheme calls the Eligible Member Balance, available after twelve months of total membership, and may be used up to five times across a membership.

Special circumstances, under 46(4), carry the same hundred per cent ceiling and the same twelve-month membership condition, and may be used twice in a financial year.

Two provisions attached to these are genuinely useful and almost never mentioned. Under 46(5), a member who leaves employment before completing twelve months of membership is still eligible for a partial withdrawal, capped at the Eligible Member Balance on that date. And under 46(6), the permitted number of withdrawals is counted afresh from the date the Scheme commenced, so withdrawals taken under the old Scheme do not count against the new limits.

The twenty-five per cent that is not in the Scheme

Everything in paragraph 46 is expressed as a percentage of the Eligible Member Balance, and the Explanation to the paragraph defines that as the credit of the member in the Fund after deducting the Minimum Balance required to be maintained.

So the hundred per cent figure is not as generous as it sounds. You can take all of what is eligible, and what is eligible is your balance minus a floor you are not allowed to break. Reported as a share of the whole balance, that is where the familiar seventy-five per cent comes from.

The part worth knowing is that the Scheme does not say twenty-five per cent anywhere. The phrase “Minimum Balance” appears exactly once in the notification, in that Explanation, and the figure is left to be set outside the text. Coverage has reported it as twenty-five per cent and that is the number in use, but it sits in administrative decision rather than in the gazette, which means it can be changed without amending the Scheme. If you are planning a withdrawal around that floor, it is worth checking what the floor is on the day rather than assuming the number you read last year still holds.

Why the Scheme itself pushes you to transfer

When you change jobs you have two options, and they are not symmetrical. The Scheme is built to reward transferring the account and to penalise emptying it, in three separate places.

Paragraph 47 governs how your period of membership is counted for partial withdrawals, and it is generous. It includes service under the same employer from before the Scheme applied, periods of membership of the Fund, periods in a private provident fund of an exempted establishment, and periods as an employee exempted under section 143 of the Code. Then it attaches a proviso: all of that counts only if the member has not severed membership by withdrawing their provident fund during the period.

Paragraph 49(3) does the same thing from the other direction. A member who takes a full withdrawal under 49(2) and is later re-employed has to qualify again for membership, and on qualifying is treated as a fresh member. Not a returning member with history. A new one.

The third penalty is tax, and it is the expensive one. Under section 10(12) of the Income-tax Act read with Rule 8 of Part A of the Fourth Schedule, the accumulated balance is exempt where the member has rendered five years of continuous service. Continuous service is measured across employers, so three years at one job and two at the next adds up to five, provided the balance was transferred rather than withdrawn in between. Withdraw at the switch and the clock starts again from zero at the new employer.

Rule 8 does waive the five-year test where service ended because of the member’s ill health, the discontinuance of the employer’s business, or another cause beyond the member’s control. A voluntary resignation to take a better offer is not one of those.

Where the five-year test is not met and the taxable amount is ₹50,000 or more, tax is deducted at source under section 192A at ten per cent. Reporting on the rate that applies without a PAN is inconsistent across sources, so if that applies to you it is worth confirming with EPFO before filing rather than relying on a blog. Note also that the Income-tax Act, 2025 came into force on 1 April 2026 and renumbers these provisions; the section numbers above are the 1961 Act numbers, which still govern income up to FY 2025-26.

Three thresholds that get run together

A great deal of confusion comes from the fact that three separate rules in this area use similar-sounding periods for completely different purposes. They are not the same test and meeting one tells you nothing about the others.

Reading the passbook without misreading it

The passbook sits behind a UAN login on the EPFO member portal, and the first thing to get right is that it is organised by member ID, not by person. Each employment generates its own member ID under your UAN. If a previous job’s contributions appear to have vanished, the usual explanation is that they are sitting under a different member ID, or under an entirely separate UAN that was created because a later employer did not find your existing one.

The second thing is to know what each column should show. Your own twelve per cent goes wholly to EPF. The employer’s share is split, with a portion going to the pension fund rather than to your EPF balance, which is why the two sides of the passbook do not match and are not supposed to. The mechanics of that split, and the pension formula it feeds, are worked through in the guide to how one deduction becomes three benefits. The wage ceiling that governs how much of it is compulsory was raised to ₹25,000, which changed both the deduction and what it pays back.

Third, allow for lag. A contribution normally appears within a few days to three weeks of the employer filing its return, and a gap inside that window is not yet a problem. Compare the wage month in the passbook against the deduction on your payslip for the same month, not against the month the salary was paid.

When a month really is missing

A deduction that appears on your payslip and never reaches your passbook is money that has left you and not arrived. The sequence for chasing it is unglamorous and works.

One thing worth saying plainly: an employer that deducts your share and does not deposit it is not merely late. EPFO has recovery powers against establishments in default, which is why a documented grievance is worth more than a sequence of unanswered emails to HR.

The pension money, if you leave before ten years

The Employees’ Pension Scheme is the part of the employer’s contribution that does not build a balance you can see. What happens to it when you leave turns almost entirely on whether you have ten years of pensionable service.

Below ten years, you can take the money out as a withdrawal benefit, claimed on Form 10C. Since June 2024 the benefit has been computed on completed months of contributory service rather than only completed years, which helps anyone whose service ends part way through a year.

At ten years or more, withdrawal is not available. What Form 10C gets you instead is a Scheme Certificate, which records your pensionable service and carries it forward so it can be added to service at a later employer and converted into a monthly pension when you become eligible. Keeping the certificate matters, because reconstructing service history later is harder than filing for it at the time.

Two details are reported inconsistently across sources: the age conditions attached to Form 10C, and whether a minimum period of service is needed before any withdrawal benefit is payable. We could not resolve those against a primary text, and they are worth confirming on the EPFO portal for your own service record rather than taking from a guide, including this one. The pension formula itself, and the sixty-month averaging rule that does more to the result than anything else, are set out in the EPF, EPS and EDLI guide.

Gratuity, and who now qualifies

Gratuity sits outside the provident fund entirely. It is paid by the employer, not from a fund you contribute to, and it is governed by section 53 of the Code on Social Security, 2020, which has been in force since 21 November 2025.

For a permanent employee the rule has not changed: five years of continuous service with the same employer. The five-year requirement is waived where employment ends through death or disablement.

For fixed-term employees it has changed substantially. A fixed-term employee becomes entitled after one year of continuous service, paid on a proportionate basis, and the expiry of the fixed term is itself one of the events on which the five-year requirement does not apply. The Ministry has clarified that this covers employees engaged directly by the employer; contract labour supplied through a contractor is treated differently.

The 240-day condition that calculators attach to the qualifying year is real and statutory. Section 54 of the Code deems you to have a year of continuous service if you actually worked at least 240 days in the preceding twelve months, or 190 days in a mine or an establishment running fewer than six days a week. Paid leave, lay-off days and maternity leave of up to 26 weeks all count towards it. How that feeds into the amount you are owed is a calculation with its own traps.

The reason gratuity matters more than it used to is that the labour codes pushed basic pay towards half of total pay, and gratuity is calculated on that higher base. What that does to a CTC figure, and why the gratuity line in an offer is money you only ever see if you stay long enough, is worked through in the guide to negotiating an offer under the new codes.

Before you click withdraw

The decision that costs people the most is also the easiest one to make carelessly, because the portal makes withdrawing and transferring look like equivalent options on the same screen. They are not.

Emptying the account at a job change severs membership under paragraph 47, makes you a fresh member under paragraph 49(3), and resets the five-year tax clock under Rule 8. Those three consequences compound, and none of them is reversible by paying the money back in. Against that, the full balance is not usually available anyway on an ordinary resignation, because paragraph 49(2) wants twelve months of unemployment first.

If you need money during a gap rather than after one, the partial withdrawal heads in paragraph 46 are the route the Scheme intends you to use, and paragraph 46(5) keeps them open even to someone who leaves inside their first year of membership.

None of this is advice on your particular situation, and a service record with gaps, exempted-establishment periods or multiple UANs is worth putting in front of someone who can see the whole file. What it is meant to do is stop you planning around a two-month rule that stopped being the general rule on 1 July 2026.