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Business News/ Money / Personal Finance/  How NRIs can transfer balance amount from provident fund
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How NRIs can transfer balance amount from provident fund

Assuming you have rendered continuous service of five years or more, the withdrawal of accumulated provident fund balance is not liable for tax as per the above and accordingly, there should be no requirement for TDS.

Under the exchange control law, an individual qualifying as non-resident Indian (NRI) may open a NRE account or NRO account. (iStockphoto)Premium
Under the exchange control law, an individual qualifying as non-resident Indian (NRI) may open a NRE account or NRO account. (iStockphoto)

What are the restrictions on transferring the balance accumulated in an Employee Provident Fund (EPF) to an non-resident ordinary (NRO) account? My attempt to deposit my PF amount into my non-resident external (NRE) account was rejected by the bank. Also, one of the bank employees said it cannot be deposited in my NRO account either. What are the government guidelines regarding such transfer?

—Sreenivasa Rao Kagolanu

Under the income tax law, the accumulated balance due and becoming payable to an employee participating in a recognized provident fund is excluded from computation of total income under the following circumstances:

a. If the employee has rendered continuous services with this employer for a period of five years or more; or

b. If the service has been terminated by reason of the employee’s ill-health, or by the contraction or discontinuance of the employer’s business or other cause beyond the control of the employee;

c. If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognized provident fund maintained by such other employer; or

d. If the entire balance standing to the credit of the employee is transferred to his NPS (National Pension Scheme) account

Assuming you have rendered continuous service of five years or more, the withdrawal of accumulated provident fund balance is not liable for tax as per the above and accordingly, there should be no requirement for TDS. However, any interest earned post cessation of employment till date of withdrawal will be liable to tax.

Under the exchange control law, an individual qualifying as non-resident Indian (NRI) may open a NRE account or NRO account. As per Schedule 3 of the Foreign Exchange Management (Deposit) Regulations, 2016, the NRO account can be credited for the following amounts:

a. Proceeds of remittances received in any permitted currency from outside India through banking channels or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of non-resident banks.

b. Legitimate dues in India of the account holder.

c. Transfers from other NRO accounts.

d. Any amount received by the account holder in accordance with exchange control law.

The provident fund withdrawal proceeds may be construed as legitimate dues and accordingly, credit of provident fund withdrawal proceeds may be a permissible credit to the NRO Account. Accordingly, you may request the provident fund Authorities to transfer the withdrawal proceeds to your NRO bank account.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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Published: 14 Jun 2023, 11:07 PM IST
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