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Epf withdrawal/transfer dilemma

Tax planning 358 views 1 replies

Shubam

Student

24 Points Joined February 2014

Hi All,

I have questions regarding EPF withdrawal. I resigned from my organisation in 2012 and went for higher education and since then I have not claimed my EPF. This year I would resume work in April on completion of my degree. I want to know whether I should withdraw or transfer my EPF money given the following facts.

1) I believe that any EPF money is taxable if withdrawn before 5 years (as in my case) but as I was not working from 2012 in financial year 2013-14 my EPF money of about 50K would not be taxable.

2) My organisation was not employee friendly and I don't want to continue hassling with them for transfer.

Kindly suggest which option to take.

Replies (1)

Saleem Abdul

397 Points Joined April 2012

Hi Shubam

As per Rule 8 of Part A to the First Schedule, your epf balance is taxable. It is very clear and there is no point in saying that your epf is not taxable being worked for less than 5 years.

If you don't have any intention of working for 5 more years somewhere you can withdraw the amount.

Otherwise it is better to withdraw after 5 years of continuous service.

The additional tax will be like this:

Tax will be calculated for the working years as if your epf is not recognised epf (80C deduction won't be allowed) - Tax already paid for the working years

The difference amount is the tax you need to bear.