I used to be working in a company and left just lately after 5 years and 9 months of steady service. Employee Provident Fund (EPF) within the mentioned group is managed beneath their non-public belief and never in EPFO. It is linked to my Universal Account Number (UAN). The group that I’ve joined now, doesn’t come beneath the purview of Provident Fund (PF) Act and can’t deduct PF from wage. Hence, my earlier group has requested me to withdraw the PF quantity gathered as I’ve accomplished 2 months from my final date.
Can I switch my gathered PF quantity from the Trust to EPFO by way of UAN and let the quantity stay there? In case I shift jobs once more, can I switch it to a special group in future?
If I can’t switch the quantity, I should withdraw it. In that case, how ought to I make investments the corpus in order that the quantity is saved invested in some instrument?
Since I’ve greater than 5 years of service, tax wouldn’t be levied on PF withdrawal. Is my understanding right?
—Name withheld on request
We perceive that your present employer group shouldn’t be coated beneath the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (the EPF Act). Hence, they won’t be able to open a PF account for you.
As per the provisions of the EPF Act and its guidelines, PF steadiness can solely be transferred from one PF account to a different PF account.
In the absence of a brand new PF account with the brand new employer, you won’t be able to switch your erstwhile PF steadiness.
Also, there isn’t any mechanism beneath the legislation whereby the PF steadiness could be transferred by the worker straight from a non-public belief to EPFO particularly the place the present employer shouldn’t be coated beneath the EPF regime.
We haven’t verified the belief guidelines and have therefore not commented on the requirement of a compulsory withdrawal in your case.
Further, as this question is from an funding perspective, chances are you’ll need to seek the advice of with a monetary advisor.
As per Section 10(12) learn with Rule 8 of Part A of fourth schedule of the Income-tax Act, 1961 (the Act), the gathered PF steadiness due and payable to the worker i.e. steadiness to his credit score on the date of cessation of his employment, is exempt from tax if he has rendered steady service for a interval of 5 years or extra.
In the moment case, as your interval of employment with the earlier group was greater than 5 years, your complete gathered steadiness to the extent payable to you on the time of ceasing employment with the group, shall be exempt from tax.
However, please word that any accretions to the Provident Fund (PF) steadiness from the time that you simply ceased employment with the earlier group (that’s, after the final day of working with the group until date of withdrawal), could be taxable in your fingers.
Parizad Sirwalla is companion and head, world mobility providers, tax, KPMG in India.
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