When do you transfer the PF funds to the new air conditioner?

I worked in an organization for three years, but was transferred to a new unit after the company split and worked here for four years and six months. While the Employee Provident Fund (EPF) account shows no breaks for the entire period, the UAN site shows the service records for two organizations separately. I am currently facing an issue when filing a claim online as the tenure is shown as less than five years and therefore there is a withholding tax (TDS). How can I resolve this?

—Sudha

In accordance with the provisions of the Income Tax Act 1961, the accumulated balance due and becoming payable to an employee participating in a recognized provident fund is excluded from the calculation of his total income.

(i) if he has rendered continuous service to his employer for a period of five years or more, or

(ii) if service has been terminated by reason of the employee’s ill health, or by the contraction or cessation of the employer’s business or for any other cause beyond the employee’s control, or

(iii) if, upon termination of employment, the employee obtains employment with any other employer, to the extent that the accumulated balance due and becoming payable is transferred to his individual account in any recognized provident fund maintained by the new employer; Where

(iv) if the entire balance remaining to the employee’s credit is transferred to his NPS account

As noted above, if upon termination of employment the accumulated balance due and becoming payable is transferred to the PF account with the new employer and the total period of service is five years or more, the withdrawal is not not taxable. Therefore, in this case, there will be no TDS.

It should be noted that the online UAN portal separately reflects the period of service with the respective employers. If the PF accruals from the first employer are transferred to the PF account with the new employer, the PF department automatically considers the accrued period of service and allows the available waiver and therefore no TDS is applied.

Based on the limited facts available, it appears that you did not transfer the PF accruals from the first employer and therefore the PF department considers the period of service to be less than 5 years and therefore considers the same as taxable and deducts the withholding tax / TDS.

You can therefore arrange for the transfer of the PF accruals from the first employer to the PF account with the new employer (following the process specified under the PF scheme depending on whether the previous entity was with RPFC or had an internal trust), which allow EPFO ​​to grant you the exemption stated above, otherwise you must claim the tax refund when filing the tax return. In the event of a request for a tax refund in the declaration, the tax authorities may ask for explanations on this subject, considering that the TDS has been deducted by the EPFO ​​from this income.

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG India.

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