Hi,
One of my colleagues is quitting his present job. He has been employed for the last 3 years and he does not plan to take up a new job/employment for the time being. He wishes to know the following:
1. Whether tax is payable on the withdrawal of EPF after only 3 years of continuous service?
2. If yes, does he have an option of not withdrawing the EPF, say, for some time or at least till the end of this FY, so that the same is not accounted for in this FY income. And if allowable, what is the maximum time the amounts can be kept with the Trust managing the same and also whether it can be hit by any limitation?
3. If the amounts in EPF are not withdrawn, whether the employees (or rather ex-employee) will get interest on the same and if so, at what rate?
Looking forward to replies.
Thanks
From India, Madras
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One of my colleagues is quitting his present job. He has been employed for the last 3 years and he does not plan to take up a new job/employment for the time being. He wishes to know the following:
1. Whether tax is payable on the withdrawal of EPF after only 3 years of continuous service?
2. If yes, does he have an option of not withdrawing the EPF, say, for some time or at least till the end of this FY, so that the same is not accounted for in this FY income. And if allowable, what is the maximum time the amounts can be kept with the Trust managing the same and also whether it can be hit by any limitation?
3. If the amounts in EPF are not withdrawn, whether the employees (or rather ex-employee) will get interest on the same and if so, at what rate?
Looking forward to replies.
Thanks
From India, Madras
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Hi Asok,
Check this...
PROVIDENT FUND
Note: If employers are paying PF contributions at 12% of Actual Basic for their employees, is it possible to cut down the PF contribution to Rs 780 only (12% on a minimum basic of Rs 6500)?
Q1) What is the Contribution for Provident Fund by both the Employer and Employee?
Ans: The Employee contributes 12% of his/her Basic Salary, and the same amount is contributed by the Employer.
Q2) Is it Compulsory for all employees to contribute to the Provident Fund?
Ans: Employees drawing a basic salary up to Rs 6500/- have to compulsory contribute to the Provident fund, and employees drawing above Rs 6501/- have an option to become a member of the Provident Fund.
Q3) Is it beneficial for employees who draw a salary above Rs 6501/- to become a member of the Provident Fund?
Ans: Yes, because provident fund contribution by the employer and employee is not taxable income for Income Tax purposes.
Q4) What if an employee, while joining the establishment, has a basic salary of Rs 4200, and after some time, his basic salary increases above Rs 6501/-, does he have an option to terminate his membership from the Provident Fund Act?
Ans: An employee who, while joining the organization, has a basic salary above Rs 6501/- has an option to either become or avoid becoming a member of the Provident Fund. However, employees whose basic salary, while joining the organization, is less than Rs 6501/- but increases above Rs 6501/- after some time, have to compulsorily continue to be a member of the Provident Fund.
Q5) What is the contribution percentage to the Provident Fund and Pension Scheme?
Ans: Employers contribute 12% of the basic salary, which is totally deposited in the provident fund account. Out of the Employees' contribution of 12%, 3.67% is contributed to the Provident Fund, and 8.33% is deposited in the Pension Scheme.
Q6) Which form has to be filled while becoming a member of the provident fund?
Ans: Nomination Form No. 2 has to be filled to become a member of the Provident Fund, and the form is available with the HR department.
Q7) Which form has to be filled while transferring provident fund deposits?
Ans: You just have to fill form no. 13 to transfer your P.F. amount.
Q8) What is the provision of the scheme in the matter of nomination by a member?
Ans: Each member has to make a nomination to receive the amount standing to his credit in the fund in the event of his death. If he has a family, he has to nominate one or more persons belonging to his family and none other. If he has no family, he can nominate any person or persons of his choice, but if he subsequently acquires a family, such nomination becomes invalid, and he will have to make a fresh nomination of one or more persons belonging to his family. You cannot make your brother your nominee as per the Acts.
Q9) When is an employee eligible to enjoy the pension scheme?
Ans: For an employee to become eligible for the Pension Fund, he has to complete membership of the Fund for 10 years.
Q10) What does it mean by continuous service of ten years?
Ans: When we say continuous service of 10 years in the Employee Pension Fund, we mean that during services, for example, an employee who has worked with X company for 3 years, then he resigned from that organization and joined Y company, where he worked for 2 years, then resigned from there to join an establishment for 5 years. During these 10 years of service, he has not withdrawn but transferred his Employee pension fund, then we say continuous service of ten years.
Q11) When can an employee avail the benefit of the Employee pension fund scheme which he has contributed to during his ten years of continuous service?
Ans: An employee can avail the benefit after completion of 58 years of service.
Q12) What happens to the provident fund and Employee Pension fund if an employee who wants to resign from the service before completion of ten years of continuous service?
Ans: An employee can withdraw the PF accumulations by filling Forms 19 & 10 C, which are available with the HR department.
Q13) What are Form 19 and 10C?
Ans: Form No. 19 is for Provident fund withdrawal, and Form No. 10 C is for Pension scheme withdrawal.
Q14) Do we get any interest on the amount deposited in the Provident Fund account?
Ans: Compound interest, as declared by the Govt., is given for every year of service.
Q15) What is the accounting year for the Provident Fund account?
Ans: The accounting year is from March to February.
Q16) What are the benefits provided under the Employee Provident Fund Scheme?
Ans: Two kinds of benefits are provided under the scheme - a) Withdrawal benefit b) Benefit of non-refundable advances.
Q18) What is the purpose of the Employee's Pension Scheme?
Ans: The purpose of the scheme is to provide for 1) Superannuation pension 2) Retiring Pension 3) Permanent Total disablement Pension. Superannuation Pension: A member who has rendered eligible service of 20 years and retires on attaining the age of 58 years. Retirement Pension: A member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58 years. Short service Pension: A member has to render eligible service of 10 years and more but less than 20 years.
Q19) How much time does it take to receive P.F and pension money if an employee resigns from the Service?
Ans: Normally the procedure for receiving P.F and Pension money is, the employee has to fill Forms 19 and 10 C and submit the same to the PF Desk, which is then submitted to the P.F office after two months. This two months is nothing but a waiting period as the rules state that an employee should not be in employment for two months after resigning if he has to withdraw his P.F amount. After completion of two months, the form is submitted to the regional provident fund Commissioner office, after which the employee receives his amount along with interest within a period of 90 days.
Q20) Do we receive money through a postal order?
Ans: Previously there was a procedure wherein a member used to get P.F through a Postal order, but now while submitting the P.F form withdrawal form, you have to mention your saving Bank account No. and the complete address of the Bank where you hold the account.
Q21) How would I know the amount of accumulations in my PF account?
Ans: The PF office sends an annual statement through the employer, which gives details about the PF accumulations. The statement contains details like Opening balance, the amount contributed during the year, withdrawal during the year, interest earned, and the closing balance in the PF account. This statement is sent by the PF department on completion of the financial year.
Q22) Which establishments are covered by the Act?
Ans: Any establishment which employs 20 or more employees. Except apprentices and casual laborers, every Employee including contract labor who is in receipt of basic salary up to Rs. 6500 p.m. is covered by the Act.
Q23) In case after registering the establishment at any point in time, the number of employees working in it becomes less than 20, then will the Act apply?
Ans: Any establishment which has been covered under the Act once shall continue to be governed by the Act even if the number of persons employed therein at any time falls below 20.
Q24) Is the Act applicable to a factory which is closed down but is employing a few employees to look after the assets of the establishment?
Ans: No, Where the establishment is closed down and only four security men are employed for keeping a watch over the assets and properties of the establishments, the Act would not be applicable.
Q25) Is a trainee an employee under the Act?
Ans: Yes, a trainee would be considered as an employee as per the Act, but in case the trainee is an apprentice under the Apprentice's Act then he/she will not be considered as an employee under this Act.
Q26) Is it possible to appeal the orders of the Central Government or the Central Provident Fund Commissioner?
Ans: Yes, there is a body called the Provident Fund Appellate Tribunal where an employer can appeal.
Q27) Who is the authority to decide regarding the disputes if any?
Ans: In case there is a dispute regarding the applicability of the Act or the quantum of money to be deducted, etc., the authority to decide are the i)Central Provident Fund Commissioner, ii)any Additional Provident Fund Commissioner, iii)any Additional Central Provident Fund Commissioner, iv)any Deputy Provident Fund Commissioner, v)any Regional Provident Fund Commissioner, or vi)any Assistant Provident Fund Commissioner.
Q28) What if there are workers involved as Contract labor?
Ans: It is the responsibility of the Contractor to deduct the PF and submit a statement to the Principal Employer in the prescribed format by the 7th of every month. The Company becomes the Principal Employer would be responsible for the PF deduction of the workers employed on a contract basis.
Q29) Are the persons employed by or through a contractor covered under the Scheme?
Ans: Persons employed by or through a contractor are included in the definition of "employee" under the Employee's Provident Finds Act, 1952, and as such, they are covered under the Scheme.
Q30) In case the Contractor fails to deduct and submit the PF amount from the contract workers, then what is to be
From United States, Palo Alto
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16Check this...
PROVIDENT FUND
Note: If employers are paying PF contributions at 12% of Actual Basic for their employees, is it possible to cut down the PF contribution to Rs 780 only (12% on a minimum basic of Rs 6500)?
Q1) What is the Contribution for Provident Fund by both the Employer and Employee?
Ans: The Employee contributes 12% of his/her Basic Salary, and the same amount is contributed by the Employer.
Q2) Is it Compulsory for all employees to contribute to the Provident Fund?
Ans: Employees drawing a basic salary up to Rs 6500/- have to compulsory contribute to the Provident fund, and employees drawing above Rs 6501/- have an option to become a member of the Provident Fund.
Q3) Is it beneficial for employees who draw a salary above Rs 6501/- to become a member of the Provident Fund?
Ans: Yes, because provident fund contribution by the employer and employee is not taxable income for Income Tax purposes.
Q4) What if an employee, while joining the establishment, has a basic salary of Rs 4200, and after some time, his basic salary increases above Rs 6501/-, does he have an option to terminate his membership from the Provident Fund Act?
Ans: An employee who, while joining the organization, has a basic salary above Rs 6501/- has an option to either become or avoid becoming a member of the Provident Fund. However, employees whose basic salary, while joining the organization, is less than Rs 6501/- but increases above Rs 6501/- after some time, have to compulsorily continue to be a member of the Provident Fund.
Q5) What is the contribution percentage to the Provident Fund and Pension Scheme?
Ans: Employers contribute 12% of the basic salary, which is totally deposited in the provident fund account. Out of the Employees' contribution of 12%, 3.67% is contributed to the Provident Fund, and 8.33% is deposited in the Pension Scheme.
Q6) Which form has to be filled while becoming a member of the provident fund?
Ans: Nomination Form No. 2 has to be filled to become a member of the Provident Fund, and the form is available with the HR department.
Q7) Which form has to be filled while transferring provident fund deposits?
Ans: You just have to fill form no. 13 to transfer your P.F. amount.
Q8) What is the provision of the scheme in the matter of nomination by a member?
Ans: Each member has to make a nomination to receive the amount standing to his credit in the fund in the event of his death. If he has a family, he has to nominate one or more persons belonging to his family and none other. If he has no family, he can nominate any person or persons of his choice, but if he subsequently acquires a family, such nomination becomes invalid, and he will have to make a fresh nomination of one or more persons belonging to his family. You cannot make your brother your nominee as per the Acts.
Q9) When is an employee eligible to enjoy the pension scheme?
Ans: For an employee to become eligible for the Pension Fund, he has to complete membership of the Fund for 10 years.
Q10) What does it mean by continuous service of ten years?
Ans: When we say continuous service of 10 years in the Employee Pension Fund, we mean that during services, for example, an employee who has worked with X company for 3 years, then he resigned from that organization and joined Y company, where he worked for 2 years, then resigned from there to join an establishment for 5 years. During these 10 years of service, he has not withdrawn but transferred his Employee pension fund, then we say continuous service of ten years.
Q11) When can an employee avail the benefit of the Employee pension fund scheme which he has contributed to during his ten years of continuous service?
Ans: An employee can avail the benefit after completion of 58 years of service.
Q12) What happens to the provident fund and Employee Pension fund if an employee who wants to resign from the service before completion of ten years of continuous service?
Ans: An employee can withdraw the PF accumulations by filling Forms 19 & 10 C, which are available with the HR department.
Q13) What are Form 19 and 10C?
Ans: Form No. 19 is for Provident fund withdrawal, and Form No. 10 C is for Pension scheme withdrawal.
Q14) Do we get any interest on the amount deposited in the Provident Fund account?
Ans: Compound interest, as declared by the Govt., is given for every year of service.
Q15) What is the accounting year for the Provident Fund account?
Ans: The accounting year is from March to February.
Q16) What are the benefits provided under the Employee Provident Fund Scheme?
Ans: Two kinds of benefits are provided under the scheme - a) Withdrawal benefit b) Benefit of non-refundable advances.
Q18) What is the purpose of the Employee's Pension Scheme?
Ans: The purpose of the scheme is to provide for 1) Superannuation pension 2) Retiring Pension 3) Permanent Total disablement Pension. Superannuation Pension: A member who has rendered eligible service of 20 years and retires on attaining the age of 58 years. Retirement Pension: A member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58 years. Short service Pension: A member has to render eligible service of 10 years and more but less than 20 years.
Q19) How much time does it take to receive P.F and pension money if an employee resigns from the Service?
Ans: Normally the procedure for receiving P.F and Pension money is, the employee has to fill Forms 19 and 10 C and submit the same to the PF Desk, which is then submitted to the P.F office after two months. This two months is nothing but a waiting period as the rules state that an employee should not be in employment for two months after resigning if he has to withdraw his P.F amount. After completion of two months, the form is submitted to the regional provident fund Commissioner office, after which the employee receives his amount along with interest within a period of 90 days.
Q20) Do we receive money through a postal order?
Ans: Previously there was a procedure wherein a member used to get P.F through a Postal order, but now while submitting the P.F form withdrawal form, you have to mention your saving Bank account No. and the complete address of the Bank where you hold the account.
Q21) How would I know the amount of accumulations in my PF account?
Ans: The PF office sends an annual statement through the employer, which gives details about the PF accumulations. The statement contains details like Opening balance, the amount contributed during the year, withdrawal during the year, interest earned, and the closing balance in the PF account. This statement is sent by the PF department on completion of the financial year.
Q22) Which establishments are covered by the Act?
Ans: Any establishment which employs 20 or more employees. Except apprentices and casual laborers, every Employee including contract labor who is in receipt of basic salary up to Rs. 6500 p.m. is covered by the Act.
Q23) In case after registering the establishment at any point in time, the number of employees working in it becomes less than 20, then will the Act apply?
Ans: Any establishment which has been covered under the Act once shall continue to be governed by the Act even if the number of persons employed therein at any time falls below 20.
Q24) Is the Act applicable to a factory which is closed down but is employing a few employees to look after the assets of the establishment?
Ans: No, Where the establishment is closed down and only four security men are employed for keeping a watch over the assets and properties of the establishments, the Act would not be applicable.
Q25) Is a trainee an employee under the Act?
Ans: Yes, a trainee would be considered as an employee as per the Act, but in case the trainee is an apprentice under the Apprentice's Act then he/she will not be considered as an employee under this Act.
Q26) Is it possible to appeal the orders of the Central Government or the Central Provident Fund Commissioner?
Ans: Yes, there is a body called the Provident Fund Appellate Tribunal where an employer can appeal.
Q27) Who is the authority to decide regarding the disputes if any?
Ans: In case there is a dispute regarding the applicability of the Act or the quantum of money to be deducted, etc., the authority to decide are the i)Central Provident Fund Commissioner, ii)any Additional Provident Fund Commissioner, iii)any Additional Central Provident Fund Commissioner, iv)any Deputy Provident Fund Commissioner, v)any Regional Provident Fund Commissioner, or vi)any Assistant Provident Fund Commissioner.
Q28) What if there are workers involved as Contract labor?
Ans: It is the responsibility of the Contractor to deduct the PF and submit a statement to the Principal Employer in the prescribed format by the 7th of every month. The Company becomes the Principal Employer would be responsible for the PF deduction of the workers employed on a contract basis.
Q29) Are the persons employed by or through a contractor covered under the Scheme?
Ans: Persons employed by or through a contractor are included in the definition of "employee" under the Employee's Provident Finds Act, 1952, and as such, they are covered under the Scheme.
Q30) In case the Contractor fails to deduct and submit the PF amount from the contract workers, then what is to be
From United States, Palo Alto
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Hi Ashok,
Regarding your queries:
1) Yes, tax is applicable on the withdrawal of EPF before 5 years. The employer's contribution and the interest earned on the total contribution are taxable.
2) There is no time limit for withdrawal. An unclaimed PF balance cannot be claimed by anyone else.
3) As long as your EPF balance is unclaimed, you will continue to receive interest on it.
Thank you.
From India, Hyderabad
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Regarding your queries:
1) Yes, tax is applicable on the withdrawal of EPF before 5 years. The employer's contribution and the interest earned on the total contribution are taxable.
2) There is no time limit for withdrawal. An unclaimed PF balance cannot be claimed by anyone else.
3) As long as your EPF balance is unclaimed, you will continue to receive interest on it.
Thank you.
From India, Hyderabad
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