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EPF Time Limits and Taxation

K (Self) (23 Points)

05 March 2020

- I am an employee at a company and getting the EPF benefit (Employee / Employer).
- I have incorporated my own LLP and thinking of switching over on contract i.e. my current employer will become my client from LLP.
- My tenure with the current company is ~ 10 months.
- I have never had EPF account before this.

My questions are:

1. What is the time period between contributions before the EPF is considered taxable? If I stop contribution now, how many months/years are allowed before it's considered taxable.

2. I am thinking of contributing to PPF as a backup. So if I contribute 1.5L to PPF in addition to EPF, will there be an issue (I understand 80C limit is 1.5L so deduction is capped, but does the investment earn interest or do they return the funds etc.).

3. Can I register with EPF only with 1 employee?

Thank you in advance for your help

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2 Replies

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 10 April 2020

Tax exemption on EPF corpus is permitted only if an employee contributes to the EPF account for 5 continuous years. The EPF amount is taxable if there is a break in the contribution to the account for 5 continuous years. In that case, the entire EPF amount will be considered as taxable income for that financial year.

Applicability of EPF Registration for Employers

EPF registration is mandatory for all establishments-

which is a factory engaged in any industry having 20 or more persons, and

to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification specify in this behalf.

Central Government may apply any establishment employing less than 20 employees after giving not less than two months’ notice for compulsory registration

Where the employer and majority of employees have agreed that the provisions of this act should be made applicable to the establishment, they may themselves apply to the Central PF Commissioner. The Central PF Commissioner may apply the provisions of this Act to that establishment after passing the notification in the Official Gazette from the date of such agreement or from any subsequent date specified in the agreement.

Some establishments having less than 20 employees would also be required to obtain PF registration but that is voluntary registration. All the employees will be eligible for a PF from the commencement of their employment and the responsibility of deduction & payment of PF lies with the employer.