24 June 2020
Today, in year 2020, I am 37. I started my epf contribution at the age of 31. My queries are below:
1. If I am still working in 2021 and contributing my epf (including employee contribution, employer contribution and VPF), can I withdraw all of my corpus from epf, including the one I contributed in 2020 while I am still working with the same organization, and all of that is tax free? 2. Let's say in year 2022, at age of 39, I stop working and I do not join any other organisation. If I do not want to withdraw my whole epf balance till the age of 58, can I continue earning interest on all of corpus (including epf and VPF) when I am not working (which means I am not contributing to EPF from year 2022)? Is that interest accrual tax free? In my opinion, interest accrual is not tax free after one stops working and stops contributing to EPF 3. Let's say in year 2022, I go abroad and become nri. This means, my epf contributions have stopped. Assuming the interest accrued is taxable after the contributions stop (even if one is nri and working abroad), would it be fine if I become an employee (on papers) of any company in India at very little basic salary of 10000 per month (against say 3 lakh basic per month in my previous job in India) and they keep contributing to my epf. The aim is just to keep earning tax free interest accrual on the existing epf corpus if I choose not to withdraw EPF corpus when I quit my job in India and shift abroad and become nri. Can the income tax department question it that how come i am an nri and stil employed in some company in India at such low salary? 4. Let's say in year 2022, I quit my job and shifted abroad (stopped epf contributions). I didn't withdraw my accumulated corpus. Now, assuming my accumulated corpus is earning interest but taxable. In year 2024, I again came back to India and started working and started contributing to EPF on the same UAN. Now, will the interest earned on the total corpus, assuming that was taxable between year 2022 and 2024 because I was not working in India and not contributing to EPF, will the interest accrued will now become tax free on the total accumulated corpus till 2024 with effect from my job joining date in 2024?
24 June 2020
If you want you can withdraw full amount
Else you can keep it for retirement benefits.
In the future if you don't work then you will get good amount of salary in the form of pension
If you become NRI then interest will be liable for TDs deduction under section 195
Keeping PF has good benefits than withdrawal since the main motive of PF is to protect you from financial problems at the older age
10 August 2024
Your questions about the Employees' Provident Fund (EPF) cover various scenarios involving employment, residency status, and taxation. Let’s break down each query:
### 1. Withdrawing EPF Corpus While Still Employed
If you are still employed and contributing to the EPF, you typically cannot withdraw the EPF corpus while continuing your employment. EPF withdrawal is generally allowed under specific circumstances such as retirement, unemployment for two months, or certain medical emergencies. However, if you want to withdraw the EPF corpus while still working, you would need to meet the withdrawal criteria set by the EPF authorities.
Regarding tax treatment, if you are eligible for withdrawal, the amount you withdraw, including employee and employer contributions, is generally tax-free. This is subject to conditions like the duration of service and other criteria set by the EPF regulations.
### 2. Interest Accrual When Not Contributing
If you stop working and stop contributing to the EPF, your existing corpus will continue to earn interest. The interest accrued on the EPF balance after you cease contributions is generally tax-free, provided that you do not withdraw the amount and meet certain conditions (like the account being maintained for at least five years from the date of the last contribution).
The interest earned on EPF is tax-free as long as the corpus remains within the EPF and the account is not withdrawn. This means even if you are not contributing, the interest accrued remains tax-free until withdrawal.
### 3. Becoming an NRI and EPF Contributions
As an NRI, if you stop contributing to EPF and only earn interest on the corpus, the interest accrued is tax-free while the corpus remains in the EPF account.
If you become an employee in India at a very low salary to keep your EPF account active, the Income Tax Department might scrutinize such arrangements to ensure that it is not a means to avoid tax or for other improper purposes. It's essential to ensure that any arrangement is genuine and complies with legal norms. Tax authorities may question the low salary if it seems inconsistent with your past earnings or employment situation.
### 4. Returning to India and Tax on Interest Accrued
If you return to India and start contributing to EPF again, the interest accrued on your EPF corpus during the period you were abroad and not contributing is taxable for the period you were not contributing. However, once you resume contributing and the account is active, the interest on the entire corpus going forward remains tax-free, provided you meet the conditions for tax-exempt status.
In summary: - EPF withdrawals while employed are generally not allowed unless specific conditions are met. - Interest on EPF is tax-free as long as it remains in the EPF account and is not withdrawn. - As an NRI, keeping a low-paying job in India to maintain an EPF account could be scrutinized. - Upon returning to India and resuming EPF contributions, interest accrued during your non-contributing period remains taxable for that period, but future interest on the total corpus is tax-free under normal conditions.
Always consider consulting a tax advisor or EPF authority for advice tailored to your specific situation, as rules and interpretations can change.
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