EPF Doubts Cleared: Tax, Transfer, Merger

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Anonymous: I have two EPF accounts with balances of ₹1.6 lakh and ₹2.4 lakh under the same UAN. I plan to merge both EPF accounts into a single account. After the merger, will the total combined balance of ₹4 lakh earn interest as one EPF account without any break? Are there any conditions, delays, or risks of interest loss during the account consolidation process that I should be aware of?

Yes, after you merge your 2 EPF accounts, the combined balance of 4 lakhs will keep on earning interest till retirement without any break.

Thing for you to consider before merging: Make sure the entire data is correct in both accounts; any discrepancy might delay or reject the merger.

Anonymous: I have completed 10 years of continuous service and accumulated an EPF balance of ₹9 lakh. I plan to retire at the age of 58. If I withdraw the entire EPF amount at the time of retirement, will the full withdrawal be completely tax-free? Are there any conditions, limits, or exceptions under income tax rules that I should be aware of?

As you have done 10 years of service and plan to retire at the age of 58 years, your entire withdrawal will be tax-free for you.

However, there is a portion called EPS (Employee Pension Scheme) which cannot be withdrawn by you, instead you will get a monthly pension per se the EPS accumulated amount.

9 lakhs is tax-free.

Anonymous: I worked for 6 years in my previous company and accumulated an EPF balance of ₹5.2 lakh. I have now joined a new employer and plan to transfer my EPF instead of withdrawing it. If I transfer the entire EPF amount to my new employer, will the full balance continue to earn interest without any break? Does the transferred amount count towards my total years of EPF service for tax-free withdrawal eligibility in the future?

Transferring your old EPF to your new EPF account is the wisest decision. Your entire old balance will continue to earn interest till your retirement. And total years of service will be tax-free henceforth.

Thus it is always best to transfer your old PF account to new employer.

Anonymous: I earn a basic salary of ₹25,000 per month and have completed 4 years and 6 months of continuous service in my organisation. I am planning to withdraw my Employees’ Provident Fund (EPF) balance of ₹3.8 lakh. Since my total service period is less than 5 years, will this withdrawal be taxable? How much TDS will be deducted if my PAN is linked, and how will the final tax liability be calculated while filing my income tax return?

As the serviceable tenure is less than 5 years, your withdrawal will be taxable. You can expect a TDS of 10% on that but final tax would be as per your Income Tax slab.

Hence, unless absolutely necessary, avoid withdrawing the EPF and let it as is for your retirement.

• You can ask rediffGURU Reetika Sharma your questions HERE.

MUST READ:

Part 1: Payslip To Pension To Long-Term Wealth: How EPF Works

Part 2: EPF Secrets Revealed: Where Your 12% Goes

Part 3: EPF@8.25%: Is It Really Worth It?

Part 4: How EPS Turns Part Of Your PF Into Lifelong Income

Part 5: EPF: How To Withdraw Smart, Protect Your Corpus

Part 6: Your EPF Can Fund Housing, Surgery, Education...

Part 7: Who Gets Your PF Money After You...

Part 8: How EPF Protects Your Family After You

Part 9: How EPF Compounds But Inflation...

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Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.