Are you an EPF member and feature changed jobs? If so, ensure that you switch your old EPF stability to the brand new account with the modern organization. Though the Universal Account Number (UAN) stays the identical across EPF debts, remember the fact that having the same UAN isn’t similar to balance switch. The earnings tax regulations governing the Employees’ Provident Fund (EPF) examine with the Income Tax Appellate Tribunal (ITAT) decision in ACIT versus Rajnrekar in November 2017 makes it obligatory to merge old EPF accounts into your cutting-edge EPF account or face tax implications.
EPF is a mandatory deduction for employees running in businesses with 20 or more workers. Here, 12% of your simple salary and dearness allowance is contributed by using the employer and any other 12% is deducted by way of the agency from your salary and introduced in your EPF account. When you turn jobs, the new agency opens a brand new EPF account. If you neglect to switch the balance amassed in the old account into the new one, it can increase your usual tax legal responsibility.
An EPF account with a corporation becomes inoperative after you go away the job. However, the account continues to earn interest, which is taxable, in keeping with the ITAT decision in ACIT versus Ranjrekar case, because you’ve got left the process. If you have got taken a ruin from work, become self-hired or joined a non-EPF-included company, you’re technical “no longer employed” for the functions of EPF. In this situation, the hobby which accrues every 12 months into your old EPF account will become taxable even in case you do no longer withdraw any money from the account.
If you join a new agency covered via EPF, the brand new company opens another EPF account. Since you are hired for EPF, the hobby on this new EPF account is not taxable. And if you transfer the stability in your vintage EPF account to this one, the hobby on the sooner corpus will also become tax-unfastened.
In many cases, the two money owed may be linked by your Universal Account Number (UAN). However, “UAN linkage isn’t always the same as a transfer of stability. Interest on your antique account will no longer be tax-exempt simply because it’s miles related to the equal UAN as the brand new account. You need to actively switch the balance,” stated Madhu Damodaran, director, HR business offerings, Co-Achieve Solutions Pvt. Ltd.
Not shifting your antique EPF balance to your new account may also suggest that the 5-year qualifying period for tax exemption is reset to the date of the brand new account. Let’s recognize this with an instance. Suppose a worker works at corporation X for three years and then moves to corporation Y for some other three years. He has EPF accounts at each business and fails to merge them. He then leaves corporation Y to start his very own commercial enterprise and withdraws the balances from each the sooner EPF accounts. Here, the withdrawals can be taxable even though he has completed six years of a carrier in overall. His provider length isn’t counted because he didn’t switch his stability in agency X to agency Y.
Another tax implication of failure to transfer your EPF stability is that antique employment intervals will now not depend for pension eligibility. As lots as 8.33% of a business enterprise’s 12% contribution are diverted to Employees’ Pension Scheme (EPS). After ten years of non-stop carrier with a corporation in the EPF machine, a worker will become eligible for pension underneath EPS after accomplishing the age of fifty-eight. Service intervals with old employers depend, provided vintage balances are transferred to the present day EPF account. “The 10 years’ provider duration required for eligibility for EPS may also no longer get fulfilled if vintage balances aren’t transferred to the contemporary agency. For the cumulative length to remember, transfer of EPF stability is critical,” said Amit Gopal, important, India Life Capital Pvt. Ltd, a Mercer company this is an investment advisory company.
How to switch
To transfer the stability from an antique EPF account to a new one, you surely ought to log in for your EPF account on-line together with your UAN and password. Go to the “Online Services” drop-down and choose “One Member – One EPF Account Transfer Request.” Re-enter your UAN or the vintage EPF member ID and your account details will be displayed. Select whether or not you would really like your modern-day or preceding employer to validate the transfer. Now select the old account and generate a one-time password (OTP). Once you input the OTP, a request could be sent on your organization (cutting-edge or preceding—both can facilitate a switch to the cutting-edge EPF account) to manner the transfer online.
To switch offline, refill Form thirteen and submit it in your old or present-day organization.
If you have did not declare the EPF hobby in your return, you can revise the return before the quit of the assessment 12 months. “If the window for revision is closed, it’s far advisable to pay the applicable tax with a hobby and report a letter with the income-tax officer along with side computation of tax,” stated Prakash Hegde, a Bengaluru-based chartered accountant.
To keep away from the greater tax burden, transfer your antique EPF account balance for your present-day one properly in time.