EPFO Hikes Auto-Settlement Limit for PF Withdrawals to ₹5 Lakh

Union Labour Minister Mansukh Mandaviya on Tuesday announced a significant enhancement to the Employees' Provident Fund Organisation (EPFO) services. The limit for auto-settlement of advance withdrawal claims has been increased from ₹1 lakh to ₹5 lakh.

“The EPFO has increased auto-settlement limit for advance claims from Rs 1 lakh to Rs 5 lakh to facilitate faster fund access for EPFO members, especially in times of urgent needs,” Union Labour Minister Mansukh Mandaviya said while addressing reporters.

This move will now enable EPFO members to receive advance withdrawal claims of up to ₹5 lakh within just three days, significantly improving access to funds during urgent situations.

Key Enhancement to EPFO’s Digital Claim Settlement Process

"This major service enhancement is expected to benefit lakhs of members," the minister added.

The auto-settlement facility, first introduced during the COVID-19 pandemic to provide timely financial aid, has now become a critical part of EPFO’s digital transformation. It allows claims to be processed entirely by the system, ensuring faster turnaround, greater transparency, and zero human intervention.

Faster Access for Urgent Needs – Marriage, Illness, Education & Housing

The automated system covers advance claims for key life events such as:

• Illness

• Education

• Marriage

• Housing

These services ensure that EPFO members can access their funds without delays in emergencies.

Record Spike in Auto-Settlements in FY25 and FY26

“In FY25, the EPFO processed a record 2.34 crore advance claims through auto-settlement, 161 per cent higher compared to 89.52 lakh claims settled in FY24,” Mandaviya stated.

He further highlighted:

“59 per cent of all advance claims in 2024-25 were settled through auto mode as compared to 31 per cent in 2023-24.”

Within just the first 2.5 months of FY26, EPFO has already auto-settled 76.52 lakh claims, accounting for 70 per cent of all advance claims processed so far.

Automation Driving EPFO’s Service Efficiency

“This growth highlights EPFO's strong focus on automation and delivering faster, more efficient services to its members,” the minister emphasized.

The recent upgrade in auto-settlement limits aligns with EPFO’s vision of streamlining claim settlements and making its systems more user-centric and responsive.

History of EPFO

The Employees' Provident Fund Organisation (EPFO) stands as one of the largest social security organizations globally, playing a pivotal role in ensuring the financial well-being of the organized sector workforce in India. Its history is a testament to India's commitment to social security and welfare for its working population.

Early Seeds of Provident Fund in India (Pre-1951)

The concept of a provident fund (PF) in India is not entirely a post-independence phenomenon.

• Early 20th Century: Some private companies and government departments had their own provident fund schemes, though these were limited in scope and not uniformly regulated.

• 1925: The first Provident Fund Act was passed, primarily to regulate the provident funds of a few private concerns. Its applicability was very narrow.

• 1929: The Royal Commission on Labour highlighted the urgent need for establishing provident funds for industrial workers across the country. This was a significant recommendation that laid the groundwork for future legislation.

• Post-Independence Discussions (1940s): After India gained independence, the importance of a structured social security program became even more apparent. The Indian Labour Conference in 1948 generally agreed that a statutory provident fund for industrial workers was essential.

• Coal Mines Provident Fund Scheme (1948): The successful implementation of the Coal Mines Provident Fund Scheme in 1948 served as a crucial precedent and fueled the demand for similar schemes in other industries.

The Directive Principles of State Policy in the Constitution of India (enacted in 1950) also emphasized the State's responsibility to make effective provisions for public assistance in cases of unemployment, old age, sickness, and disablement, further solidifying the need for a comprehensive provident fund system.

The Birth of EPFO: Ordinance and Act (1951-1952)

The concrete steps towards establishing a nationwide provident fund began in the early 1950s:

• November 15, 1951: The Employees' Provident Funds Ordinance was promulgated. This marked the official genesis of the Employees' Provident Fund in India, a temporary measure to immediately address the social security needs.

• March 4, 1952: The Ordinance was swiftly replaced by the Employees' Provident Funds Act, 1952. This Act was introduced in Parliament as Bill Number 15 of 1952, aiming to provide for the institution of provident funds for employees in factories and other establishments across India.
• November 1, 1952: The Employees' Provident Funds Scheme, 1952, framed under Section 5 of the Act, came into force in its entirety, covering specific industries initially (cement, cigarette, electrical, mechanical, and general engineering products, iron, steel, paper, and textile industries).

This Act is now famously referred to as The Employees' Provident Funds & Miscellaneous Provisions Act, 1952, and it extends to the whole of India, except Jammu and Kashmir (though some provisions might apply there based on subsequent legal developments). The Employees' Provident Fund Organisation (EPFO) was established to administer this Act and its various schemes.

Evolution of Schemes and Mandates

Over the decades, the EPFO's mandate and the schemes it administers have expanded significantly to provide a more holistic social security net:

• Employees' Provident Fund Scheme, 1952 (EPF): This remains the primary scheme, focusing on accumulating a retirement corpus for employees, with contributions from both the employee and the employer. It provides a lump sum payment upon retirement, resignation, or death, and allows for partial withdrawals for specific needs (e.g., house construction, higher education, marriage, illness).

• Employees' Family Pension Scheme, 1971: Recognizing that the provident fund alone might not be sufficient for a deceased employee's family, this scheme was introduced to provide a monthly pension to the family members. A portion of the PF contribution from both employee and employer, along with a Central Government contribution, was diverted to this fund.

• Employees' Deposit Linked Insurance Scheme, 1976 (EDLI): This scheme provides life insurance coverage to EPF members. In case of the death of an employee who was a member of the scheme at the time of death, a lump sum amount is paid to the nominee/legal heir, dependent on the employee's last drawn wages.
• Employees' Pension Scheme, 1995 (EPS): This was a major overhaul, replacing the Employees' Family Pension Scheme, 1971. The EPS, 1995, is a 'Benefit-defined-social-insurance-scheme' designed on actuarial principles, providing monthly benefits for superannuation/retirement, disability, survivorship, and to widows/widowers and children. It is primarily funded by diverting 8.33% of the employer's contribution to the Provident Fund, with the Central Government also contributing 1.16% of the employee's wages.

EPFO Modernization and Digital Transformation

In recent years, EPFO has undergone significant modernization and digital transformation to enhance service delivery and improve efficiency, especially considering it manages a massive clientele and volume of financial transactions:

• Universal Account Number (UAN): Introduced in 2014, UAN is a 12-digit number that remains the same throughout an employee's career, regardless of job changes. It links multiple Provident Fund accounts (Member IDs) allotted to an individual by different employers, making it easier to transfer and withdraw funds.
• Online Services: EPFO has rapidly moved towards digital services, including online registration of establishments, online generation of UANs, online claim submission (for withdrawals, transfers, and pension), online passbooks, and an online grievance management system. This has significantly reduced processing times (e.g., claims settlement from 20-30 days to 3-10 days, with targets to reduce it further).
• Centralised Payment Pension System (CPPS): Implemented to streamline pension payments, ensuring direct transfer to beneficiaries' bank accounts via the NPCI platform, eliminating delays caused by inter-office transfers.
• Aadhaar Seeding and KYC Compliance: Mandatory Aadhaar linking for EPF accounts and emphasis on KYC compliance to enhance security and streamline transactions.
• Facial Authentication Technology (FAT): Introduced to simplify the submission of Digital Life Certificates (Jeevan Pramaan Patra) for pensioners, allowing submission from home.
• Partnerships: EPFO continues to tie up with various banks (like SBI) for online payment of contributions and explores partnerships for integrating its services.

EPFO Current Status and Importance

Today, the EPFO operates under the administrative control of the Ministry of Labour and Employment, Government of India. It is the apex decision-making body for the Central Board of Trustees (CBT), Employees' Provident Fund, which comprises representatives from the government (central and state), employers, and employees.

The EPFO manages assets worth over ₹15.6 lakh crore (US$209 billion as of 2021) and serves millions of subscribers, making it one of the largest social security organizations in the world. Its continuous efforts towards digitalization, stringent enforcement, and adherence to global social security standards underscore its vital role in providing financial security and stability to the Indian workforce, especially during old age, disability, or for their dependents.

Conclusion 

The EPFO’s decision to increase the auto-settlement limit for advance withdrawals from ₹1 lakh to ₹5 lakh marks a major leap in providing faster and more efficient financial access to its over 7 crore members.

By ensuring that claims up to ₹5 lakh are processed within three days without human intervention, the organization is reinforcing its commitment to digitization, transparency, and user-centric service. The rapid increase in auto-settled claims—from 89.52 lakh in FY24 to 2.34 crore in FY25—clearly reflects growing user trust and the system’s efficiency.

Moreover, the early figures from FY26 indicate a continuation of this trend, with 70% of claims already processed via automation in just 2.5 months. This initiative not only empowers EPFO members during critical life events such as illness, marriage, or housing but also sets a benchmark for government-backed financial systems aiming for digital transformation and enhanced public service delivery in India.