Is EPF earned when not employed taxable?

I’m 50 years outdated. I give up my job in May final yr after working for 15 years.  I’ve collected a big Employee’s Provident Fund (EPF) corpus.  Is EPF curiosity earned throughout the subsequent few years taxable? Will I be capable of withdraw cash from EPF yearly to satisfy my residing bills?

— Name withheld on request

As per the provisions of the Income-tax (I-T) Act, 1961, the collected steadiness due and changing into payable to an worker collaborating in a acknowledged provident fund (PF), is exempt within the palms of the worker to the extent offered in rule 8 of Part A of the fourth Schedule.

Further, as per the Rule 8 of Part A of the fourth Schedule to the I-T Act, collected steadiness due and changing into payable from a acknowledged PF shall be excluded from the computation of complete earnings of worker—

(i) if he has rendered steady service along with his employer for a interval of 5 years or extra, or

(ii) if the service has been terminated by cause of worker’s ill-health, or by contraction or discontinuance of the employer’s enterprise or different trigger past the management of the worker, or

(iii) if, on the cessation of employment, the worker obtains employment with every other employer, to the extent the collected steadiness due and changing into payable is transferred to his particular person account in any acknowledged PF maintained by the brand new employer; or

(iv) if the whole steadiness standing to the credit score of the worker is transferred to his NPS account.

It is to be famous that the time period “collected steadiness attributable to an worker” means the balance (including accretions thereon) standing to the credit of an employee on the day of cessation of his employment. In such a case, the exemption is available only in respect of accumulated balance (as on the last day of your employment). Any interest income accrued post-cessation of your employment would be considered as taxable income and is required to be offered to tax. As this income would be in the nature of “income from other sources” the identical could also be provided to tax as per the strategy of accounting recurrently adopted by you i.e. money or mercantile foundation.

Also, please be suggested that withdrawal of EPF accumulations might be made solely as a lump sum in a single go, post-cessation of employment. However, withdrawal within the type of advances of funds could also be attainable in sure specified circumstances (e.g. presently advance being allowed throughout covid as much as three months’ fundamental wage and DA, advance whereas being unemployed for a couple of month, and so forth.)

Further, as per provisions of EPF Scheme, 1952, curiosity shall not be credited to the account of a member from the date on which it has turn out to be an inoperative account. Central Government vide notification no. G.S.R. 1065 (E) dated 11 November 2016 amended the EPF Scheme whereby adjustments have been made within the circumstances resulting in a PF account changing into an inoperative account. After implementation of such provisions, an account turns into inoperative if no declare has been most popular by the member after attaining the age of 58 years/precise date of retirement, whichever is later. Thus,  you’ll proceed to earn curiosity on EPF accumulations until you attain 58 years of age.

Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India.

Subscribe to Mint Newsletters

* Enter a sound e-mail

* Thank you for subscribing to our publication.