According
to provident fund norms, 12 per cent of an employee’s salary goes into the fund
along with a matching contribution from the employer.
The
Employees’ Provident Fund Organisation (EPFO) has been taking many steps to
ease the process of provident fund (PF) money withdrawal. The PF money can be
withdrawn after two months from the cessation of employment. The application
form can be filed with the PF authorities or through the employer. PF is meant
for saving towards retirement years. Financial planners advise not to withdraw
from the corpus before retirement. According to provident fund norms, 12 per
cent of an employee’s salary goes into the fund along with a matching
contribution from the employer. The Employees’ Provident Fund Organisation
every year announces interest rate to be paid on the accumulated provident fund
corpus.
Here
are 10 things to know:
1)
To encourage long-term savings, the government has formulated tax laws
accordingly. If the withdrawal from a recognised PF happens after five years of
continuous employment, it attracts no tax liability. In case of employment with
different employers, if the PF balance maintained with the old employer is
transferred to the PF account of the new employer, it is considered a
continuous employment.
2)
If an employee has been terminated because of certain reasons beyond his or her
control (such as ill health and discontinuation of business of employer), the
withdrawal does not attract any tax, irrespective of the number of years of
employment.
3)
In case of a withdrawal before five years, the amount becomes taxable in the
same financial year. Thus, the amount has to be shown in your tax return for
the next assessment year. The employer’s contribution to PF and interest earned
on it is added to one’s income and taxed accordingly.
4)
In addition, if you have claimed benefits under Section 80C on your own PF contribution,
it will be taxed as salary. The interest earned on your own contribution will
be taxed as ‘income from other sources’ and taxed according to the respective
tax slabs.
5)
TDS (tax deducted at source) – If the withdrawal is after a period of five
years of continuous employment, it attracts no TDS or any tax. What happens if
the period of service is less than five years? If PAN has not been submitted to
the EPFO authorities, TDS is deducted at 30 per cent. If PAN has been submitted
along with Form 15G/15H, no TDS is deducted. If form 15G/15H is not submitted
and PAN is submitted, TDS @ 10% is deducted. Form 15H or 15G is meant to
prevent TDS for those whose income falls below the taxable limit.
6)
The funds transferred from a recognised provident fund (PF) account to a
National Pension System (NPS) account will not attract any tax, Pension Fund
Regulatory and Development Authority (PFRDA) said in a circular dated March 6.
“The amount so transferred from recognised Provident Fund/Superannuation Fund
to NPS is not treated as income of the current year and hence not taxable,” the
pension fund regulator said.
7)
The Employees’ Provident Fund Organisation has come out with a single-page form
for provident fund related claims – from provident/pension fund withdrawal to
the advance facility.
8)
In addition, an Employees’ Provident Fund Organisation or EPFO subscribers can
submit the new one-page form directly to the retirement fund body without the
employer’s attestation if their accounts are seeded with Aadhaar and bank
account details.
9)
For subscribers who are yet to seed Aadhaar and bank details, a new composite
claim form has been introduced which has to be submitted with attestation of
employers for any claims.
10)
Also, no other document would be required to be submitted by the subscriber for
taking advances from the provident fund corpus. A provident fund subscriber can
go for partial withdrawal/advance from his or her corpus for specific purposes
like purchase of flat, construction, marriage/education of children etc.
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