Should I withdraw my PF account corpus?
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I left my job recently after working there for five years and two months. My employer managed the provident fund (PF) in its private trust, and my PF account was linked to my UAN (unified account number). I have now joined a new company which is small and does not come under the ambit of Employee Provident Fund (EPF) Act.
Since my new employer will not deduct and deposit PF in my account, my previous employer has asked me to withdraw the PF amount that has accumulated thus far. Can I transfer my PF balance from the private trust to EPFO through UAN? In case I shift jobs again, can I transfer it to a different organization in future?
—Name withheld on request
Since your current employer is not covered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, it will be unable to establish a PF account on your behalf. According to the provisions outlined in the EPF Act and its rules, the transfer of PF balance is permissible only between two PF accounts. Given the absence of a new PF account with your current employer, the transfer of your previous PF balance is not feasible.
Moreover, the existing legal framework does not provide a mechanism for employees to directly transfer their PF balance from a private trust to the Employees’ Provident Fund Organization (EPFO), particularly in cases where the current employer is not subject to the EPF regime.
If you intend to remain within the PF scheme and anticipate your current employer becoming eligible in the near future, you have the option to refrain from withdrawing your PF balance. Subsequently, when your current employer enrols in the PF scheme, you can transfer the accumulated funds from your previous employer to the current one. It’s important to note that interest on the PF balance will no longer accrue three years from the date of resignation.
Further, any interest that accrues from the date of resignation to the date of transfer or withdrawal will become taxable in your hands.
Under Section 10(12) in conjunction with Rule 8 of Part A of the fourth schedule of the Income-tax Act, 1961 (the Act), the accumulated PF balance payable to the employee, representing the balance at the time of cessation of employment, qualifies for tax exemption if the individual has provided continuous service for a period of five years or more.
In your specific situation, since your tenure of employment with the previous organization exceeded five years, the entire accumulated balance, to the extent payable upon ceasing employment, is exempt from tax.
Neeraj Agarwala is partner, Nangia Andersen India.
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Published: 07 Jan 2024, 08:49 PM IST
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