I left a company (Company 1) in mid-October 2018 after 5.5 years of continuous service. I did not withdraw or transfer the EPF from company 1. At the end of October 2018, I joined company 2 where the UAN was identical to company 1. I left company 2 in January 2021 and I joined company 3 after a few days in January 2021 (UAN remained the same).
Now I want to withdraw the accumulated EPF funds for the purchase of land. Most of the EPF balance is with company 1. If I transfer EPF from company 1 and company 2 to company 3 and then request an advance for the construction of the land, will it be considered taxable? Please advise.
—Amit Srivastava
From a fiscal point of view, in accordance with section 10 (12) read together with rule 8 of part A of the fourth schedule of the Income Tax Act 1961 (the Act), the accumulated balance of the PF due and payable to the employee, i.e. the balance to his credit on the date of termination of his employment, is exempt from tax if he has rendered continuous service for a period of five years or older.
When there are multiple PF accounts and the PF balances are transferred to the most recent PF account, the cumulative employment period relating to all these PF accounts should be viewed in order to assess whether the employee has rendered continuous service. for a period of five years or more.
In the present case, where the PF balances are transferred to Company 3 (the last employer), the cumulative employment period will be considered to be greater than five years. Accordingly, any withdrawal / advance authorized on the accumulated balance will be tax exempt.
Alternatively, if you withdraw the balance from the PF account maintained with Company 1 (without transferring to Company 3), the balance accumulated up to your last date of service with Company 1 would be tax-free anyway. because you have completed more than five and a half years of service with the company 1.
Please let me know if we can deduct / adjust the municipal property tax paid from the taxable income if you are staying in a detached house. If so, under which article of the IT law? I am a retiree who lives in my own apartment.
—Name hidden on request
In accordance with the provisions of Section 23 (1) of the Income Tax Act 1961, the municipal tax deduction is available on the gross rent to determine the net rental value (i.e. annual value) which is taken into account for tax purposes.
However, the annual value of an independent property according to Article 23 (2) should be considered as NIL.
Thus, in your case, the annual value of an independent property will be considered as NEL without any deduction for municipal taxes.
Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG India.
Never miss a story! Stay connected and informed with Mint. Download our app now !!
