5 years of continuous service mandatory for tax free EPF withdrawal

My question is relating to EPF withdrawal. I joined my earlier job on 23 September 2016 and final working day was 20 September 2021. If I’m unemployed for two months and withdraw the total EPF quantity, will it entice tax? Additionally, do 4 years, 11 months and 28 days of service depend as 5 years of steady service? – Prateek Kumar

Reply by Dr Suresh Surana, founder, RSM India.

Funding in Worker Provident Fund (EPF) enjoys the standing of Exempt-Exempt-Exempt (EEE) i.e. Exempt on Funding, Exempt from Curiosity accrued thereon and Exempt on Maturity. Nonetheless, these exemptions are topic to circumstances.

5 years of steady service is a compulsory situation to avail the good thing about exemption on withdrawal of quantity from EPF account. The Act specifies sure distinctive circumstances whereby even when the quantity is withdrawn previous to rendering 5 years of steady service, the identical is eligible for exemption. These distinctive eventualities are listed under:

If the service has been terminated due to:

a. The worker’s ailing well being; or

b. By the contraction or discontinuation of the employer’s enterprise; or

c. Different trigger past the management of worker

It’s pertinent to notice that the Act says that whereas calculating the interval of 5 years, one must also keep in mind the interval served underneath the previous employer/employers. There isn’t any such clarification offered both within the Revenue Tax laws or the PF laws which states {that a} interval greater than 6 months is to be handled as 1 full 12 months. Therefore, it may be inferred that right here the interval of 5 years implicitly means 5 accomplished years and since service as an worker was rendered by you just for 4 years, 11 months and 28 days i.e. 4 accomplished years, quantity withdrawn from EPF account could also be topic to tax besides in case he falls underneath the aforementioned 2 circumstances.

Nonetheless, in case of steady unemployment for a interval of as much as one month, Part 68HH of The Staff’ Provident Fund Scheme, 1952, supplies for withdrawal of 75% of the quantity excellent within the PF Fund. The stability 25% might be withdrawn after two months of unemployment.

Furthermore, in an effort to declare tax exemption, it’s possible you’ll avail the profit as offered by the federal government, vide notification GSR 225 (E) dated 27.03.2020, permitting for withdrawal of first non-refundable advance by EPF members within the present pandemic scenario underneath sub -para 3 underneath Para 68L of the EPF Scheme, 1952. Accordingly, you can be eligible for non-refundable advance of decrease of, 3 months of the fundamental wages and dearness allowances or upto 75% of the quantity standing to the credit score. The federal government has, in accordance with Announcement dated 31 Might, 2021, additionally allowed its members to avail second COVID-19 advance on the identical standards.

(Have private finance queries? Ship an e mail to mintmoney@livemint.com)

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