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Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 23, 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
Asked by Anonymous - May 16, 2024Hindi
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Hi My wife was employed in a company which paid her salary with monthly deduction of EPF from 2017-2020. She left that job. She joined again as a consultant in another company which doesn’t pay EPF. She files her taxes under 44AD We have not yet withdrawn her EPF money which has been accumulated. My queries 1) Tax implications of money withdrawn 2) whether we need to fill form 15G 3) What financial year to enter in form if I place request for withdrawal right now ?

Ans: Understanding EPF Withdrawal and Tax Implications
Withdrawing funds from your wife's Employees' Provident Fund (EPF) entails certain tax implications and procedural considerations. Let's delve into each of your queries:

Your proactive approach to understanding the tax implications of EPF withdrawal reflects your commitment to financial responsibility.

1. Tax Implications of EPF Withdrawal
EPF withdrawals are subject to tax considerations based on the duration of employment and the reason for withdrawal:

Tax on Withdrawal: If the EPF withdrawal occurs before completing 5 years of continuous service, it is taxable as per the Income Tax Act.
Tax-Free Withdrawal: EPF withdrawals after 5 years of continuous service are tax-free.
2. Requirement of Form 15G
Form 15G is a declaration under the Income Tax Act to claim TDS exemption on interest income. Whether your wife needs to submit Form 15G depends on the withdrawal amount and her total income:

No TDS for Amounts Below Threshold: If the EPF withdrawal amount is below the threshold specified by the Income Tax Department, no TDS is deducted.
Form 15G for TDS Exemption: If the withdrawal amount exceeds the threshold but the total income for the year is below the taxable limit, submitting Form 15G can prevent TDS deduction.
3. Financial Year for Form Submission
When filling out the withdrawal form, specify the financial year during which the withdrawal occurs:

Current Financial Year: If the withdrawal request is placed now, indicate the current financial year.
Previous Financial Years: If the withdrawal pertains to previous financial years, specify the respective financial years accurately.
Conclusion
Before proceeding with EPF withdrawal, consider consulting a tax advisor to assess the tax implications based on your wife's employment tenure and total income. This ensures compliance with tax regulations and maximizes the benefits of EPF withdrawal.

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.
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Dear Sir, I am working in IT industry for past 20 years and have worked in multiple companies (10) and have not worked in any company for more than 4 years. I have EPF corpus for 25 lacs. so I am part of EPF for past 20 years but I dont have continuous EPF in any organization for 5 years. If I withdraw EPF will it be taxed at my income tax slab.
Ans: About EPF Continuous Service -Since you’ve been contributing to EPF for 20 years across different companies, your overall service with the EPF remains uninterrupted.
About Tax-Free EPF Withdrawal- According to EPF rules, if you have completed 5 years of continuous service (which includes service across multiple employers without withdrawing the balance between jobs), your EPF withdrawal is tax-free. So, despite changing jobs, your service duration with the EPF is counted collectively.
Since you've been contributing for 20 years without breaking the EPF continuity, your withdrawal will not be taxed. You can withdraw the EPF corpus of Rs 25 lakh without worrying about it being taxed at your income tax slab rate.
However, if at any point your EPF service was discontinued and restarted (without a transfer of funds between accounts), the period might reset, leading to taxation concerns. If you are unsure, you could consult with your EPF office or a tax advisor to confirm your exact status. Think about linking all the old accounts in to the current account so that your continuity of service can be verified by PF authorities. Now EPF office have started unified account and you linking your old accounts to the latest account will give you combined value and tax benefits. within my Prosperity Lifestyle Hub community we share such topics to get our financial challenges resolved.
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Dating, Relationships Expert - Answered on Dec 03, 2024

Asked by Anonymous - Dec 03, 2024Hindi
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Hello, my wife is Ugandan and I’m of English national, 30 years old and she’s 26, we met nearly a year ago and got married in uk with some of her friends and small family. We haven’t done kuchala (not sure if that’s correct spelling) yet and I’m feeling anxious for when the time comes. She said her family will kneel when they greet me and being white this is already stinging my moral (due to history). I also talked about moving in together before the meet the parents happen however she says she’s rather move in after? Currently this could take two years before going to Uganda, how should I proceed without overstepping her cultural beliefs as after all we are married and by my culture we should already be living together
Ans: Dear Anonymous,
It is very nice of you to be so considerate and sensitive while handling these cultural nuances. Let's discuss the kneeling tradition. It's a sign of respect and it's deeply rooted in Ugandan culture. While I understand your point of view, you also have to remember that it can have significant meaning to her and her family. I suggest you politely express your feelings and let her know why it is uncomfortable for you to see her family kneel. When you explain, mention how much her culture means to you as well. I am sure both of you can communicate and come to a compromise that makes you both happy. Just in case, they persist in following the ritual, just look at it as a gesture of love and respect and not submission.

About the moving in together part, in certain parts of the world, couples living together before the traditional wedding is not considered respectful. But since you are already married, you can try explaining to your wife how the living situation does not go against her cultural expectations. But if it is a really big deal for her and her family, consider seeing it from her perspective.

Communication is everything here. Look at every problem as a team; it's not your problem vs her problem. It's both of you vs the problems.

I hope this helps

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Radheshyam

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I have received a job offer from Siecorp ,a Singapore based company though my posting would be at my hometown . They have asked me to submit all credentials related to education & job experiences which is quite normal but they have asked the following documents also which they said would help me to arrange through some agent by payment & the same would be reimbursed during first month of employment . Earlier also another overseas company asked for the same & I denied to make payment before having the job in hand . 1. Construction Health and Safety Technician (CHST) – Compulsory 2. OSHA Safety Certificate – Compulsory 3. Safety Trained Supervisor (STS) – Non-Compulsory Kindly advise whether these certificates are really required to be submitted to join any foreign company or any sort of cheating business regards,
Ans: Hello Bipradas.
From your query, it is clear that you have offered by job by a Singapore-based company and they are giving you a posting in your home town. You did not mention anything about the work culture of the company. It simply indicates that you are supposed to work from home which is always related to computers. I think there is no harm in producing the required documents through an agent if they are offering you a handsome salary. The requirement for documents differs from company to company. There is no harm in submitting the mentioned documents. If have fear in your mind, then please go through the profile of the company in detail before submitting the documents. There are many ways to check the authenticity of the company. There are some chances of cheating, but everybody is not indulged in the same category. But take the steps with utmost precaution.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

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Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 03, 2024

Asked by Anonymous - Nov 29, 2024Hindi
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Money
Hi , I am 46 year old and trying to see if i can take an early retirement in next 2 years. Below is my financial condition; - Mutual fund 40Lakh - FD 30 Lakhs - 2 rental yielding flat with total rent of 55000 per month - Own house with no loan. - PF 80 Lakhs - NPS 10 Lakhs - PPF 20 Lakhs - Term insurance 50Lakhs
Ans: Your financial position shows good planning and discipline.

Assets Summary:

Mutual Funds: Rs 40 lakh
Fixed Deposits: Rs 30 lakh
Rental Income: Rs 55,000 per month from two flats
Own House: Fully paid, no loan liabilities
Provident Fund (PF): Rs 80 lakh
National Pension System (NPS): Rs 10 lakh
Public Provident Fund (PPF): Rs 20 lakh
Term Insurance: Rs 50 lakh
You have built a diversified portfolio across multiple asset classes.

Assessing Early Retirement Feasibility
Early retirement in two years can be achieved with strategic planning.

Key Factors to Evaluate:

Monthly Expenses: Calculate post-retirement expenses, including inflation.
Income Sources: Ensure rental income, investments, and withdrawals meet your needs.
Wealth Growth: Balance corpus growth with income stability.
Monthly Expense Coverage
Assume your future monthly expense is Rs 1.25 lakh.

Existing Income Streams:

Rental Income: Rs 55,000 monthly provides 44% of estimated expenses.
Corpus Withdrawals: Use investments to cover remaining expenses.
Adjust for Inflation:

Plan for a 6% inflation rate to protect purchasing power.
Investment Strategy
Align your portfolio for growth, stability, and liquidity.

Mutual Funds:

Continue investing in equity-oriented funds for long-term growth.
Opt for actively managed funds through Certified Financial Planners.
Avoid index funds; they limit opportunities for alpha generation.
Fixed Deposits:

Reallocate a portion to debt mutual funds for better post-tax returns.
Retain some FDs for emergencies and short-term needs.
NPS and PPF:

Maximise NPS contributions for additional tax savings.
Allow PPF to mature for risk-free, tax-exempt growth.
Corpus Withdrawal Plan
A systematic withdrawal strategy ensures steady income.

Use Systematic Withdrawal Plans (SWP) in mutual funds for monthly cash flow.
Keep withdrawal rates below 4% annually to sustain the corpus.
Children’s Education Planning
Your son’s education may require significant funds.

Steps to Plan for Education Costs:

Use PPF maturity or mutual fund proceeds for higher education.
Avoid using retirement corpus for educational expenses.
Risk Management
Protecting your family is as critical as building wealth.

Term Insurance Coverage:

Rs 50 lakh is adequate for income replacement.
Ensure policies are active and nominees updated.
Health Insurance:

Opt for a comprehensive family floater policy with Rs 20–25 lakh coverage.
Keep health-related emergency funds for additional expenses.
Tax Planning
Efficient tax planning maximises post-retirement income.

Mutual Fund Taxation:

Equity fund LTCG above Rs 1.25 lakh is taxed at 12.5%.
Short-term gains are taxed at 20%. Plan withdrawals carefully.
Fixed Deposit Interest:

FD interest is taxable as per your slab. Consider this in income planning.
Real Estate Considerations
Your rental flats provide steady income.

Points to Consider:

Avoid further real estate investments for better liquidity.
Keep properties well-maintained to ensure uninterrupted rental income.
Healthcare and Emergency Funds
Unplanned medical costs can affect your finances.

Steps to Safeguard:

Maintain Rs 10–15 lakh in liquid assets for emergencies.
Regularly review health insurance coverage to meet rising costs.
Assessing Early Retirement Timing
Your early retirement is achievable by 48 years with careful execution.

Why This is Feasible:

Rental income and portfolio can meet monthly needs.
A diversified asset base ensures sustainable returns.
Finally
Early retirement is within your reach with disciplined planning.

Review your financial plan annually and adjust for changes in needs or markets.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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