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Frustrated by Lack of Response to EPF Query and Tax Implications

Ramalingam Kalirajan |8327 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 19, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Jamsheed on Jul 17, 2024Hindi

Dear Rediff Team, I am writing to express my disappointment regarding the lack of response to my queries submitted on 14th June and 22nd June. The first query was related to my EPF withdrawal, emphasizing its urgency as I need to initiate the process promptly. Despite sending follow-up emails on 4th July, I have not received any assistance or advice on this matter. It is disheartening to experience a lack of communication from your team of experts, especially on critical financial issues like EPF and tax-related queries. I understand the workload your team may have, but it is essential to set clear timelines for responses to avoid customer dependency and frustration. This is not the first time I have faced such issues with your team of experts. In the past, I had to send multiple reminders to receive a response from your experts. If managing the workload is a concern, I urge you to consider either updating customers about any backlog, hiring additional experts, or shutting down your "rediff guru" portals For your reference, I am reiterating my EPF-related query below: [Query Details] I kindly request your prompt attention to this matter and treat it as a priority. As a customer relying on your expertise, I expect timely and accurate responses to resolve my financial concerns efficiently. Hi experts, I have asked this questions 3 weeks back but still no response. plz plz treat this as priority. Request you to kindly respond to this on high priority. My wife worked in ABC company for 6 years and then worked in another company for 4 years. In 2015 she stopped working. Her EPF has accumulated and we are not show if we should withdraw or not. Hence to get clarity we are writing to you. Couple of quick questions - Is the EPF taxable? - Since she has not contributed since 10 years Whats the tax implication. I am confused as some articles say after 3 years there will be not be receiving interest but I have been receiving interest. While withdrawing online it shows just the last company details, in service history it shows both the companies and also the amount accumulated includes both the companies. But while withdrawing it just shows the details of her last worked company. - Also based on the above point since she worked in the last firm for 4 years in the reason for leaving it shows " CESSATION (SHORT SERVICE) - Any other reason" We went to the EPF office and asked the above questions but the lady out there said don't worry no tax since its above 5 and we since the service history shows both companies that means the details of both the companies are merged. We are a little worried as the amount is big and don't want to make any mistake while withdrawing. Please please please respond to this at the earliest as we want to withdraw the money asap. Request you to treat this as priority

Ans: 1. Taxability of EPF

General Rule: EPF withdrawals are tax-free if the employee has completed 5 continuous years of service. In your wife’s case, she worked for 6 years in one company and 4 years in another, totaling 10 years. Therefore, her EPF withdrawal should generally be tax-free.

Break in Service: Since there was no break between the two jobs, and she continued her PF contributions through both companies, this counts as continuous service. This should qualify her for tax-free withdrawal.

2. Interest Accumulation Post-2015

Interest Accumulation: EPF accounts continue to earn interest even if no contributions are made after an employee leaves the job. This interest is taxable if the EPF is withdrawn before 5 years of continuous service. However, in your wife's case, the service period is more than 5 years.

Interest Taxation: Since the total service period exceeds 5 years, the interest accumulated post-2015 should also be tax-free. This aligns with the information provided by the EPF office.

3. Withdrawal Process and Company Details

Single Employer Issue: While withdrawing online, it might show details of only the last company due to how the system processes the data. However, the accumulated amount includes contributions from both companies. The service history reflecting both companies confirms that the EPF accounts have been merged.

Cessation (Short Service): This reason is standard for employees who leave before completing 5 years with the last employer. It shouldn't impact the tax treatment or the withdrawal process, given her overall 10 years of service.

Recommendations and Next Steps
Proceed with Withdrawal: Based on the above points and the information from the EPF office, it seems safe to proceed with the withdrawal. Ensure all details match up when processing the request.

Document Everything: Keep all documentation related to the EPF withdrawal, including service history and communication with the EPF office. This will be useful if any issues arise during the withdrawal process.

Tax Filing: When filing taxes, include the details of the EPF withdrawal to ensure there are no discrepancies. Since it’s tax-free, there should be no additional tax liability.

Final Insights
Your wife’s EPF withdrawal should be tax-free, given her continuous service of 10 years. The interest earned post-2015 should also not be taxed. The process showing only the last employer is normal and shouldn't affect the withdrawal. It's essential to proceed with the withdrawal and keep all records for future reference.

I understand the urgency of this matter and regret the delay in response. I hope this clarification helps you make an informed decision quickly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.