I was working in an organization and recently left after five years and nine months of continuous service. The Employees’ Provident Fund (EPF) in the said organization is managed under his personal trust and not EPFO. It is linked to my Universal Account Number (UAN). The organization from which I have just joined does not come under the purview of Provident Fund (PF) Act nor can deduct PF from salary. So, my previous organization has asked me to withdraw the deposited PF amount as I have completed 2 months from my last date.
Can I transfer my accumulated PF amount from Trust to EPFO through UAN and let the amount remain there? If I change job again, can I transfer it to another organization in future?
If I can’t transfer the amount, I have to withdraw it. In that case, how should I invest the corpus so that the amount remains invested in an instrument?
Since I have more than 5 years of service, PF withdrawal will not be taxed. Is my understanding correct?
,Name withheld on request
We understand that your current employer organization is not covered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act). Hence, they will not be able to open PF account for you.
As per the provisions of the EPF Act and its rules, PF balance can only be transferred from one PF account to another PF account.
If the new employer does not have a new PF account, you will not be able to transfer your old PF balance.
Also, there is no mechanism under the law under which the PF balance can be directly transferred from a private trust by the employee to the EPFO, especially where the current employer is not covered under the EPF regime.
We have not verified the terms of the trust and therefore have not commented on the requirement of mandatory withdrawal in your case.
Also, since this question is from an investment point of view, you may want to consult a financial advisor.
As per section 10(12) read with rule 8 of Part A of the Fourth Schedule to the Income-tax Act, 1961 (the Act), the accumulated PF balance due and payable to the employee i.e. the balance to his credit on the date of termination if he has spent five years or If continuous service is rendered for a period exceeding that, his employment is exempt from tax.
In the present case, since the period of employment in your previous organization was more than 5 years, the total accumulated balance payable to you at the time of termination of employment with the organization would be exempt from tax.
However, please note that any increase in the Provident Fund (PF) balance from the time of termination of employment with the previous organization (ie, after the last day of working with the organization till the date of withdrawal), will be credited to your account. will be taxable. Hand.
Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India.
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