NRI wants to withdraw accumulated PF

POSTED BY Seshagiri Valdamani ON October 2, 2012 8:24 am COMMENTS (2)

I am an NRI since Aug 2005 until now. I was in USA from Aug 2005 until Jan 2012 and then permanently moved to Canada in Jan 2012. I worked for 1 company – Genpact from Jan 2002 to Jan 2012 (10 years). Worked with Genpact India on India payroll from Jan 2002 to Aug 2005 and then got transferred to Genpact USA on USA payroll from Aug 2005 until I resigned from Genpact USA service in Jan 2012 before I moved to Canada.

I applied to Genpact India about accumulated withdrawal PF and Genpact says that PF withdrawal is subject to TDS since active PF contribution was less than 5 years. My PF contribution and Genpact contribution was for only 3 years and 8 months (Jan 2002 to Aug 2005), I did not have previous PF account, so only PF account was with Genpact for 3.8 years.

Rule 8 of Part A of the Fourth Schedule of I T Act provides the circumstances under which the accumulated PF balance payable to an employee is exempt from tax . If employee fulfills any of following conditions, payment from recognized provident fund is tax free :

If he has rendered continuous service with his employer for a period of five years or more, or

 If, though he has not rendered such continuous service, the service has been terminated by reason of the employees ill-health, or by the contraction or discontinuance of the employers business or other cause beyond the control of the employee,

With reference to Rule 8 of Part A of the Fourth Schedule of I T Act, I wrote to Genpact that in my case no tax to be deducted when I submit PF refund application stating that I worked for employer Genpact – 10 years continuously which is 1 employer however at 2 different countries. The 2nd argument, I used when I wrote to Genpact India is that it was beyond my control as a employee when Genpact India transferred me to Genpact USA.

Genpact India rejected both my arguments about being continously employed with Genpact for 10 years and also about that it was beyond my control argument for claiming tax exemption and wrote back

“We checked and tax would be deducted tax within the interpretation of PF Act”

2 replies on this article “NRI wants to withdraw accumulated PF”

  1. pavan.avala says:

    Hi Manish Chauhan,

    So you mean, even though employee resigns before completing 5 years and even though employee does not contribute continuously for 5 Years, but, if employee submits request to withdraw PF amount after completing 5 years from PF account tart date, then, employee can withdraw without a need pay tax.

  2. There are two points

    1. I am not sure if your job transfer would be under those terms and conditions which you have mentioned, which part do you think makes you eligible for no tax or TDS ?

    2. I think company is mistaken in the rule, where they say that the EFP does not have active participation of more than 5 yrs, as far as I understand , its the age of the EPF which matters, which has to be more than 5 yrs, and there you are correct in saying that there should not be any tax .

    Manish

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