Want to save income tax on EPF withdrawals? Here’s what you can do
New Delhi: After the government had allowed partial withdrawal of funds from Employees’ Provident Fund accounts due to the financial slowdown induced by the lockdown across the country, lakhs of salaried class employees have been withdrawing funds from their EPF accounts. Since April 2020, more than 55 lakh EPF subscribers have withdrawn around Rs15,000 crore from the retirement corpus.
However, before making a withdrawal request online on the EPFO portal, you must check whether the withdrawal will add to your tax burden or not.
So, if in case the withdrawal happens before completion of five years of continuous service, the interest earned on the employer’s contribution and employee’s contribution will be taxable as ‘income from other sources’.
Do note that a continuous service of 5 years requires that the employee transfers the PF account in case of any change in employment. In case the employee does not transfer the PF account to the new employer but retains the PF account, the period will not be considered for calculating 5 years of continuous service.
It is to be noted that EPFO allows partial withdrawals for certain circumstances such as medical emergencies, education, marriage, home loan repayment, purchase or renovation of a house, etc.
When you change jobs, your Universal Account Number (UAN) remains the same but you need to transfer your PF account registered with an old employer to the new one.
How to transfer EPF online:
- Log into your EPFO account with UAN and password.
- Go to ‘Online services’ and click ‘One Member – One EPF Account (Transfer request).
- Verify personal information and PF account for present employment.
- Click on ‘Get details’ after which PF account details of the previous employer would appear.
- Choose either previous or current employer for attesting form.
- Click ‘Get OTP’ to receive OTP on UAN registered mobile number. Enter ‘OTP’ and click on ‘Submit’.
If your old PF account balance is carried forward to the present one, then you would automatically be eligible to withdraw more. Besides, it can also help you to save taxes.