Transferring your old EPF account to the new one can help you save taxes while making a withdrawal
EPF transfer can be done online easily in few steps
NEW DELHI :
To tide over the current economic crisis brought forth by the ongoing coronavirus pandemic, lakhs of salaried class employees have been withdrawing funds from their Employees’ Provident Fund (EPF) accounts. Since April, more than 55 lakh EPF account holders have withdrawn around ₹15,000 crore from the retirement funds kitty.
Before making a withdrawal request online on the EPFO portal, you must check whether the withdrawal will add to your tax burden or not. "In case the withdrawal happens after 5 years of continuous service, the amounts withdrawn (both principal and interest) are exempt from tax," Archit Gupta, founder and CEO, ClearTax, said.
However, in case the withdrawal happens before completion of five years of continuous service, the interest earned on the employer’s contribution and employee’s contribution is taxable as ‘income from other sources’. The principal amount consisting of employer’s contribution is taxable as ‘salary’ while the principal amount consisting of an employee’s contribution is taxable to the extent the employee has claimed deduction under section 80C in the year(s) of contribution.
"However, a withdrawal made before 5 years due to the ill health of the employee or discontinued business of the employer or for any other reason beyond the control of the employer, the same is exempt from tax," Gupta said.
Do note that a continuous service of 5 years requires that the employee transfers the PF account in case of any change in employment. In case the employee does not transfer the PF account to the new employer but retains the PF account, the period will not be considered for calculating 5 years of continuous service.
When you change jobs, your Universal Account Number (UAN) remains the same but you need to transfer your PF account registered with old employer to the new one.