FAQ on Provident Fund Withdrawals
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Is EPF transfer or withdrawal taxable?
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Under the existing Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 guidelines, any income received through a withdrawal of the Employee Provident Fund shall be deemed taxable if such a withdrawal is made by the employee before five years of continuous service.
Exemptions are provided in case the termination of employment occurs due to ill health or closure of business. Income tax is however not applicable on the accumulated EPF balance transferred to a new employer as it is a continuation of the account.
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Under the existing Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 guidelines, any income received through a withdrawal of the Employee Provident Fund shall be deemed taxable if such a withdrawal is made by the employee before five years of continuous service.
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Is there a minimum number of years that must be rendered for partial withdrawals in case of medical treatment?
- There is no minimum requirement of service years rendered for PF withdrawal in the case of availing medical treatment. The same can be availed at any time but it must be availed for self or family only. Hospitalization must be for more than one month, for major surgery or illness or on the account of a physical handicap. A person can withdraw 6 months of PF wages or the employees’ contribution, whichever is lesser.
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Can a person withdraw the EPF amount one year before retirement?
- Yes. If the employee has attained the age of 54 years or above, he/she can withdraw up to 90% of the PF balance with interest, one year before retirement.
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What should be the next course of action after moving from one job to another? Also, what should a person do if they do not take up another employment after they quit a job?
- An employee should transfer the provident fund balance from his/her old employer to his/her current employer when he/she switches jobs. The balance accumulated from the previous employer will remain as it is, while the new employer will start making new contributions starting from the date of commencement of the new job. But in instances where an employee quits employment, and does not take up any other employment, he/she can withdraw the provident fund balance. For this to happen the employee must declare that they have no intention of working in the next six months.
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What are the interest rates on the EPF amount?
- The interest rates that EPF account members enjoy, vary from year to year. This always depends on the revenues generated by the Employee Provident Fund Organization in the previous year. Currently, as of 2018, the interest rate is 8.65%.
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What are tax benefits available for the member employee under the Scheme?
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According to the Income Tax Act there is a tax deduction applicable which enables total tax-free returns for the employees.
- Tax on PF withdrawal for an amount > Rs. 50,000 before 5 years of opening the EPF account, with PAN TDS is 10% and without PAN TDS is 34.6%.
- PF withdrawal for an amount > Rs. 50,000 after 5 years of opening an EPF account will not attract tax.
- PF withdrawal for an amount < Rs. 50,000 anytime during the service does not attract tax.
- In case an employee is terminated or unemployed as a result of ill-health etc., withdrawals will not attract tax.
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According to the Income Tax Act there is a tax deduction applicable which enables total tax-free returns for the employees.
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What is UAN?
- Universal Account Number (UAN) is a 12-digit number allotted by the EPFO to each of its members to manage their PF accounts. It acts as an umbrella for members to assemble all their PF accounts associated with multiple ids (Member Identification Numbers) in one place. UAN has made it easy for employees to monitor, withdraw and transfer their PF funds. When an employee changes jobs, they need to provide their UAN to the new employer to link the new PF account. Since the UAN provides direct online access to the employees, an employer cannot deduct or hold back their PF.
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How can a member access his/her details through the portal?
- Members need to visit the UAN based Member Portal website i.e. https://uanmembers.epfoservices.in/ Initially, a member will have to activate his/her UAN by selecting a link given ‘Activate your UAN’ on the UAN Member Portal. Member should have UAN, Mobile and Member ID readily available to activate his/her UAN on the UAN Member Portal. For further details, please select the hyperlink ‘User Manual for Members’.
*Refer the FAQs on withdrawals for applicable terms and conditions
SHRM SSO