Epf transfer/withdrawal query?

Tax planning 668 views 4 replies

oyethatsme

Very Good

52 Points Joined August 2011

I worked with Company C1 for 3 years (2007-2010). After changing job I never transferred or withdrew my EPF money.

After that I worked for Company C2 for the next 3 years (2010-2013).

I have just left C2 after 3 years and have decided to start a small startup of my own and have no plans to join any other company in foreseeable future.

As per my understanding, if I withdrawa EPF money before 5 years then the amount would be taxable. If I transfer the EPF money before 5 years then then no tax is applicable.

Now given my situation, If I withdraw each of them separately then I will have to pay tax on each of them. But if first I transfer EPF money from C1 to C2 and then finally withdraw from C2 there will be no tax.

Questions –

1) Is my above understanding correct?

2) To avoid any tax, is it possible to transfer EPF from C1 to C2 now given that I have left job at C2?

3) If the accounts person at C2 denies for this transfer from C1 (because of the reason that I have left the company), can I transfer this on my own without involving company people?

4) Is there any other better solution to reduce the tax outgo?

Thanks for taking your time out and reading the question in detail. I would really appreciate your help here to clear the above doubts.

Replies (4)

Poornima Y

94 Points Joined August 2009

Where is it stated that withdrawals within 5 years are taxable?

As per Section 10 (11) "any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette" is exempt from tax.

I feel that withdrawing from both accounts separately is the easiest way. Transfer takes a lot of time. I do not know the present system of working, but some 3-4 years before, it has taken nearly one year to transfer from one account to another and that too within the same RPFC office.

oyethatsme

Very Good

52 Points Joined August 2011

Originally posted by : Poornima Y
	Where is it stated that withdrawals within 5 years are taxable? As per Section 10 (11) "any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette" is exempt from tax.

As per Section 10 (12) "the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule" is exempt.

As per rule 8 of Part A of the Fourth Schedule before 5 years is taxable.

oyethatsme

Very Good

52 Points Joined August 2011

Originally posted by : Poornima Y
	Where is it stated that withdrawals within 5 years are taxable? As per Section 10 (11) "any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette" is exempt from tax.