I’ve labored with two organizations—from December 2017 to June 2018 within the first, and from May 2019 to June 2020 within the second—however haven’t withdrawn the staff’ provident fund (EPF) quantity from both of them. My subsequent job will begin in April 2022. Should I switch the quantity from my first group’s account to the second and wait, as I don’t wish to pay taxes? Or is there another technique to proceed?
—Arjun Chawla
As per part 10(12), learn with rule 8 of half A of fourth schedule of the Income Tax Act, 1961, the amassed PF stability due and payable to the worker is exempt from tax if he has rendered steady service for 5 years or extra. Where there are a number of employers, and PF balances are transferred to the account with the newest employer, the cumulative interval of employment with all of the employers should be seen to guage whether or not the worker has rendered steady service for 5 years or extra. In the moment case, your mixed interval of employment with the primary and second organizations is lower than 5 years. Hence, it’s advisable that you just switch the stability within the first group’s PF account to the one within the second.
Once you be a part of the third group in April 2022, you may switch the mixed PF account stability to the third group’s PF account. If after addition of your interval of service with the third group, the cumulative interval of service is greater than 5 years, your entire amassed stability payable to you on the time of ceasing employment with the third group shall be exempt from tax.
However, any accretions to the PF stability for the durations you have been on a break from employment and any accretions to the PF stability from the time that you’ll stop employment with the third group (i.e. after the final day of working with the third group until date of withdrawal), could be taxable in your fingers.
Parizad Sirwalla is companion and head, international mobility companies, tax, KPMG in India.
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