Warning! Your EPF account will now be taxable if you have quit or retired from job

Warning! Your EPF account will now be taxable if you have quit or retired from job

Have you quit your job or retired from it and have not applied for the withdrawal of the accumulated balance in your EPF (employee provident fund) account in the hope that the fund will continue to earn tax-free interest, then think again. For, as per the latest tax rules, the interest that has accrued in your EPF account post employment is taxable.

Chetan Chandak, Head of Tax Research, H&R Block India, says, “Section 10(12) of the Income Tax Act exempts only 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 to the Income Tax Act. This exemption is available in the below circumstances:

(i) If he has rendered continuous service of minimum 5 years with his employer, or

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(ii) His service has been terminated before 5 years, by reason of his ill-health, or by the contraction or discontinuance of the employer’s business or other reasons beyond the control of the employee, or

(iii) In case, on the cessation of his employment, the employee obtains job with a different employer, but even in this case exemption is available only to the extent the accumulated balance due and becoming payable to him, that too if it is transferred to his EPF account maintained with new employer.

(iv) If the entire balance in his EPF account is transferred to the notified pension scheme (NPS).

Further as per fourth schedule mentioned above, ‘the accumulated balance due to an employee’ means the balance standing to the credit of the employee, or such portion thereof which the account holder can lawfully claim under the EPF rules, on the day he ceases to be an employee of such company.

 

 

Source by msn..

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