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Tag: epf

  • How is the tax on EPF curiosity calculated?

    I’ve contributed constantly to the Employees Provident Fund (EPF) for over 10 years till 31 December 2015, once I was working with an organization(say, ABC) . After quitting the agency, I didn’t withdraw my EPF and labored independently and with small firms that weren’t obligated to contribute to EPF for 2 years (2016 and 2017). I joined employer (say, XYZ) on 1 January 2018 and resumed contributing to EPF till 31 December 2019. I transferred my EPF from employer ABC to employer XYZ solely in October 2022 and withdrew my complete EPF stability on 30 April with none tax deducted at supply (TDS) by EPFO.

    Is EPF curiosity that accrued in the course of the intervals once I was not contributing to EPF taxable? Specifically, is the curiosity earned between 1 January 2016 and 31 December 2017 and between 1 January 2020 and 30 April taxable within the monetary years by which the curiosity was earned?

    —Name withheld on request

    The amassed provident fund (PF) stability to the credit score of the worker as on the date of cessation of employment, is exempt from tax, if he/she has rendered steady service for 5 years or extra. Where an worker modifications his job and transfers his PF stability from earlier employer to new employer, the interval of employment with the earlier employer(s) can also be included in computing the interval of steady service.

    As you transferred the PF stability along with your earlier employer (ABC) to your account with subsequent employer (XYZ) and thereafter withdrew the amassed PF stability, the interval of 5 years would additionally embrace the interval of service with ABC. Accordingly, the amassed stability to your credit score (until cessation of final contribution) ought to be exempt from tax on the time of withdrawal, to the extent specified.

    As held in few judicial precedents, curiosity accrued on the amassed stability, publish the interval of cessation of employment (i.e. the interval when no contribution is made to the EPF) continues to be taxable. Such curiosity shall be taxable within the respective monetary 12 months by which such curiosity is accrued/ credited on the tax charges relevant to you for the respective monetary 12 months. Accordingly, curiosity for the interval from 1 January 2016 to 31 December 2017 and 1 January 2020 to 30 April 2023 (when no contributions have been made to the PF account) ought to be taxable as earnings from different sources.

    Since you transferred the PF stability along with your earlier employer (ABC) to your account with subsequent employer (XYZ) and thereafter withdrew the amassed PF stability, the interval of 5 years would additionally embrace the interval of service with ABC.

    Accordingly, the accumulations to your credit score throughout your employment with XYZ from 1 January 2018 to 31 December 2019 (together with curiosity accrued) would additionally not be taxable. Hence, not one of the elements shall be taxable in your palms for the interval 1 January 2018 to 31 December 2019.

    Interest accrued on the amassed stability, publish the interval of cessation of employment (i.e. the interval when no contribution is made to the PF) is taxable.

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

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    Updated: 09 Jul 2023, 09:22 PM IST

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  • What efficient methods might help generate a gradual revenue stream throughout retirement?

    I’m a 55-year-old particular person employed in a personal group. My internet wage after taxes is ₹20 lakh a yr. My partner is a homemaker. Together, now we have a ₹5.93 crore funding portfolio. Approximately, 55% of that is allotted to debt devices, with 5% saved in a financial savings account and one other 5% in a provident fund (PF). About 43% is invested in equities and the remaining 2% is in gold. I’ve a 26-year-old son who’s at present pursuing an M.Com diploma after working for about three years. Therefore, I don’t anticipate vital training bills for him. However, I do have to plan for his marriage ceremony, which is able to probably happen 4 years from now. I additionally plan to retire within the subsequent six months. My annual bills quantity to ₹10 lakh .

    Under these circumstances, will my funding portfolio be ample for retirement? Also, how do I generate an everyday revenue after retirement.

    —Name withheld on request

    You have created a diversified and powerful portfolio. We assume you’re properly set to retire contemplating the corpus you’ve constructed. We would, nevertheless, recommend you re-balance your mixed portfolio within the following method:

    You can transfer your financial savings account funds to mounted revenue devices like non-covertible debentures (NCDs), mounted deposits (FDs), which is able to give common revenue. You should withdraw your PF funding publish your retirement. This can be invested in mounted revenue devices like NCDs and FDs.

    Any shortfall will be plugged by having a scientific withdrawal plan in your debt mutual fund (MF) and beginning an annuity in your National Pension Scheme. As on your son’s marriage ceremony, we’d recommend you promote a mixture of debt MFs and fairness MFs/shares and keep the asset allocation at present ranges.

    When investing in company bonds and FDs, attempt to diversify amongst varied issuers and never take extreme credit score danger.

    I’m 26 years previous and have a scientific funding plan (SIP) of ₹1,000 in SBI Small Cap Fund since 2018. However, since July 2022, I’ve elevated my whole allocation to ₹6,000. My month-to-month internet wage is ₹75,000, and I’ve an training mortgage of ₹3 lakh that must be repaid inside three years. In the quick time period of three years, my goals embrace mortgage reimbursement and constructing an emergency fund equal to 1-2 instances my annual revenue. For the long run, my aim is to construct a portfolio of ₹15-20 crore over the following 25 years, contemplating an annual wage increment of 5%. I’m additionally open to rising my SIPs, if needed. Additionally, I want to know if I ought to proceed investing in common plans or swap to direct plans in mutual funds?

    —Monil Shah

    For mortgage reimbursement and constructing an emergency fund, you will have to avoid wasting ₹30,000 per thirty days and make investments it in liquid/ extremely quick mutual funds.

    For your long-term requirement of making a corpus of ₹15-20 crore, we’d recommend you to take a position ₹25,000 in month-to-month SIPs. This must be stepped up by 10% annually. At an anticipated return of 12% for 30 years, you’ll be capable to attain your goal of ₹20 crore.

    Right now, your portfolio is skewed in direction of small and midcap funds. To scale back volatility, we’d recommend that you simply begin some SIPs in massive cap funds too. You can hold the massive:mid:small cap publicity as 50:30:20. For taking massive cap publicity, you could spend money on both Nifty index funds or Nifty ETFs (alternate traded funds). You can proceed investing in common funds supplied your monetary advisor is including worth.

    Vijay Kuppa is the chief govt officer of InCred Money (previously Orowealth).

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    Updated: 28 Jun 2023, 09:58 PM IST

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  • EPFO eases increased pension guidelines: Formula for calculation, record of paperwork

    Only twelve days window left for workers to use for increased EPS pension. With an goal to offer extra readability on tips on how to declare the next pension, the Employees’ Provident Fund Organisation (EPFO) on Wednesday launched a round on what all paperwork one can submit. The retirement fund physique has additionally detailed the strategy of computing pension on the next wage. 

    Formula for calculating increased pension for individuals who retired previous to 1 September 2014

    The pension shall be calculated based mostly on the typical month-to-month pay drawn throughout the contributory interval of service within the span of 12 months previous the date of exit from the membership of the pension fund.

    Formula for calculating increased pension for individuals who retired/will retire on or after 1 September 2014

    The pension shall be calculated based mostly on the typical month-to-month pay drawn throughout the contributory interval of service within the span of 60 months previous the date of exit from the membership of the pension fund.

    Currently, the components for calculating pension beneath the EPS scheme is the same as:=(Average wage of 60 months X service interval) divided by 70.

    In one other round launched Wednesday, the EPFO additionally directed its discipline officers for verification with a listing of paperwork the place proof of joint request/endeavor/permission from the employer is just not simply out there.

    The EPFO round acknowledged: Whereas a state of affairs has arisen the place joint request/ endeavor/ permission beneath Para 26(6) will not be available with many of the candidates who’ve filed Applications for Validation of Option / Joint Options lined beneath Hon’ble Supreme Court judgment dated 04.11.2022. Accordingly, solely in case of candidates in any other case eligible for pension on increased wages as per the instructions of the Hon’ble Supreme Court judgment dated 04.11.2022, for scrutiny concerning Para 26(6), the next process could also be adopted:

    (i) Field Offices will confirm that

    a) Employer share of PF contribution has been remitted on worker’s pay exceeding the prevalent statutory wage ceiling of ₹5,000/6,500/15,000 per thirty days from the day the fee exceeded the wage ceiling or 16.11.95 whichever is later, until date/ until the date of retirement or superannuation because the case could also be; and

    b) Administrative prices payable by the worker have been remitted on such increased wages; and

    c) Provident Fund account of the worker has been up to date with curiosity as per Para 60 of EPFS,1952 on the idea of such contribution obtained; and

    d) Any of the next paperwork have been submitted together with Applications for Validation of Option / Joint Options as proof of joint possibility and permission beneath Para 26(6).

    • Wage Details submitted by the employer together with Applications for Validation of Option / Joint Options

    • Any wage slip/letter from the employer authenticated by the employer

    • Copy of joint request and endeavor from the employer

    • Letter from PF workplace issued previous to 04.11.2022 indicating PF contribution on increased wages

    Deadline to go for increased pension from EPF

    The final date to use for the next EPS pension is June 26, 2023.

    What occurs if you happen to do not go for increased EPS?

    Opting for the next pension will scale back the buildup in your EPF and enhance your pension. However, if you don’t go for the next pension, you’re left with a big EPF corpus.

    “For people who need to retire early, making use of for EPFO’s increased pension will not be a clever thought as a result of EPS pension eligibility is simply granted after 10 years of employment and 58 years of age. The individual receives a pension from the EPS based mostly on a components and a lump sum tax-free quantity from the EPF account on the time of retirement,” said Amit Gupta, MD, SAG Infotech.

    How to apply for a higher pension under EPS on the EPFO portal

    -Visit Member e-Sewa portal – https://unifiedportal-mem.epfindia.gov.in/memberinterface/.

    -There is an option for “Pension on increased wage: Exercise of joint possibility “. Click on that

    -Select “Application kind for joint choices – Joint choices’

    -Enter the required particulars i.e., UAN, Name, Date of start, Aadhaar quantity, Aadhaar linked cell quantity, and captcha. 

    -Click on “Get OTP”

    -A one-time password will be sent to your mobile

    -Validate your details.

    -Click on “Submit” for the ultimate submission of the applying.

    Upon efficiently submitting the applying kind, an acknowledgment quantity will likely be generated.

    Meanwhile, EPFO added 13.40 lakh members on a internet foundation in March, taking the entire addition to 1.39 crore in 2022-23, based on payroll information launched final month.

     

     

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    Updated: 15 Jun 2023, 12:26 PM IST

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  • EPF passbook curiosity not updated? EPFO has this vital message for you

    EPF subscribers would possibly shortly see their pursuits being mirrored of their accounts. The method to confirm whether or not or not your curiosity is credited to your PF account or not — is through a passbook the place the details of your provident fund steadiness are displayed. The passbook could also be availed on-line from the EPFO website.

    How to entry your EPFO passbook on-line?

    You can entry your EPFO passbook on-line by the EPFO website or mobile app. To do this, it’s a must to your Universal Account Number (UAN) and password.

    Is there any financial loss to EPF members due to the delay in updating curiosity throughout the member passbook?

    Updating of member passbook with curiosity is an entry course of. The date on which the curiosity is entered throughout the passbook of the member has no exact financial bearing as a result of the curiosity earned for the 12 months on his month-to-month working balances is always added to the closing steadiness of that 12 months and it turns into the opening steadiness for the next 12 months.

    Hence, the member does not endure any financial loss in case there could also be any delay in updating curiosity of their passbook.

    Further, if a member withdraws his EPF dues sooner than the curiosity is updated in his passbook, in that case moreover, on the time of his declare settlement, the due curiosity is calculated and paid from the date it turns into due robotically by the system.

    Hence, on this case, too, there’s no financial loss to a member.

     

    Meanwhile, the EPFO provided an internet primarily based facility to submit the joint risk kind (with employers) to the subscribers for selecting a greater pension till May 3, 2023. Later the deadline was extended until June 26, 2023.

    Earlier this month, the labour ministry moreover clarified that an additional contribution of 1.16 per cent of basic wages for subscribers selecting elevated pensions shall be managed from employers’ contributions to social security schemes run by EPFO.

    India’s state-run retirement fund supervisor raised the speed of curiosity on employees’ provident fund to eight.15% for FY23. This will revenue better than 60 million subscribers of the Employees’ Provident Fund Organization (EPFO).

     

     

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    Updated: 02 Jun 2023, 01:45 PM IST

  • Higher pension or bigger PF steadiness? Things to consider sooner than rejigging EPS

    EPFO data: If you are a private sector employee, you’ll have time till June 26, to go for a greater pension beneath the Employees’ Pension Scheme (EPS) run by the Employees’ Provident Fund Organisation (EPFO). Although the taxpayers have a sufficient window to go for the higher pension beneath EPS. But they should observe that choosing the higher pension chance means a lower EPF contribution which might finish in an basic smaller EPF corpus at withdrawal upon retirement.

    Key points that employees wish to take into consideration sooner than rejigging their EPF, EPS mix

    Taxpayers now have a sufficient window to judge whether or not or not they should go for larger EPS. This is simply eligible for people who meet the requirements consistent with after they’ve been members of EPF.

    1) Archit Gupta, Founder, and CEO, Clear said one in every of many first implications for larger EPS is that such employees will routinely have lower EPF contributions. This may finish in an basic smaller EPF corpus at withdrawal upon retirement.

    The swap to EPS might very properly be a giant amount when completed with retrospective influence, the place EPF steadiness will doubtless be moved to EPS, he added.

    2) The totally different degree to contemplate is whether or not or not these taxpayers have a plan for utilising their EPF steadiness on retirement, some intend to buy a home or start a enterprise or any such funding. In such a case, they may want to attend and by no means do one thing and expend the EPF corpus after they retire, outlined Gupta

    According to Archit Gupta, in case taxpayers are a greater month-to-month pension income (which is completely taxable, whereas EPF withdrawal is completely tax-free), they may go for EPS. This is after they don’t need a giant corpus on retirement and would really like a month-to-month payout assuming they’ve a number of years of retirement ahead of them. One can get a pension as long as they reside, and spouses and kids may also get hold of some part of the pension as per eligibility.

    According to tax and funding educated Balwant Jain, three parts should be considered sooner than rejigging your EPF, EPS accounts

    1) Salary: The in the beginning is what’s your take-home wage.

    2) Age: Another challenge to be saved in ideas sooner than chance for larger EPS is your age

    3) Retirement: Balwant Jain said, one must calculate roughly the wage on the time of retirement.

    Meanwhile, subscribers selecting larger pensions will get three months to supply their consent for diverting further contributions or dues beneath the EPS, stated a spherical dated 11 May.

    “Pensioners/members may be given up to 3 months to deposit and to give consent for diversion of these dues (in prescribed format).” stated the spherical.

    The EPFO equipped an web facility to submit the joint chance kind (with employers) to the subscribers for selecting a greater pension till May 3, 2023. Later the deadline was extended until June 26, 2023.

    Earlier this month, the labour ministry moreover clarified {that a} additional contribution of 1.16 per cent of main wages for subscribers selecting larger pensions will doubtless be managed from employers’ contributions to social security schemes run by EPFO.

     

     

     

     

     

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  • Has EPFO put any bar on private PF trusts?

    I’ve been a member of the employee provident fund (EPF) for the earlier 16 years. My current group, which I’m now quitting after higher than three years, has a personal PF Trust. I could be changing into a member of a model new agency which is part of the EPFO.

    My current employer claims that the EPFO has stopped accepting funds from private trusts. Is this correct? If I was to withdraw all of the proceeds from my PF account, will or not it is matter to tax deducted at provide (TDS)? Can my current agency, being a personal perception, moreover stop paying curiosity throughout the subsequent three months?

    —Name withheld on request

    We will not be capable of contact upon the exact positions taken by the EPFO with regard to your group.

    As per the provisions of the EPF scheme, an individual can swap the amassed stability from his EPF account held with the erstwhile employer to that at a model new employer, whatever the fact that the sooner or new account is an authorised PF perception or held with the EPFO.

    As per tips, the amassed PF stability due and payable to the employee, as on the date of cessation of his employment, is exempt from tax if an employee has rendered regular service (along with the interval of earlier membership with earlier employers) for a interval of 5 years or additional. Any curiosity accruals submit cessation of employment will not be tax exempt.

    Accordingly, if the amassed stability alongside together with your erstwhile employers had been transferred to the PF Trust of your current employer, the interval of contributory service hitherto would even be added to the interval of regular service.

    Further, in case you can swap the soundness held in your current PF account with the PF Trust to the PF account of your new employer, the an identical shall even be added to your interval of regular service. In such a case, as your mixture interval of regular service could be higher than 5 years, all of the amassed stability to the extent specified must be exempt from tax on the time of withdrawal.

    A PF member would possibly withdraw the entire amount standing to his credit score rating throughout the fund solely on ceasing to be an employee in any establishment to which the PF Act applies, provided that he has not been employed in any lined establishment for a gradual interval of not decrease than two months immediately earlier the date on which he makes an software program for withdrawal.

    A PF account turns into inoperative and would not earn further curiosity, the place an employee retires from service after attaining the age of 55 years or migrates abroad fully or dies and would not apply for withdrawal of his amassed stability, inside 36 months from the date it turns into payable. Until such time, curiosity will proceed to accrue on the PF stability (whether or not or not in a PF Trust or with EPFO).

    Thus, relying in your age and specific particulars, precise implications would must be evaluated.

    Parizad Sirwalla is affiliate and head, world mobility corporations, tax, KPMG in India.

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