8 replies on this article “PF Withdrawal – Completed 8 years; Is the tax exemption only for the first 5 years ?”

1. sreejith says:

   July 13, 2012 at 4:18 pm

   Thanks Ashal – Never thought on that angle.

   Reply
2. sreejith says:

   July 13, 2012 at 11:55 am

   Some extra clarification – This would not be the sole emergency fund; This will be a top up on the existing fund. There is a separate liquid fund to the “non-emergency” category.

   The reason why I want to move it out is the the basic salary component in Company C is quite low and in turn the PF contribution would be much lower. I was thinking that moving it out would give me better compounded results.

   But I guess that would not work out since there will not be a 3 months non-employment gap.

   Reply
   1. Ashal Jauhari says:

      July 13, 2012 at 3:30 pm

      Dear Sreejith, there is more to it, Even if we assume you ‘ll remain disciplined enough to not touch this money in between, the impact of taxation as & when you touch it after 5-10-15 years, ‘ll kill a part of your gains. One more thing, if you get this amount transfer to new employer, the effect of compounding ‘ll create a larger pool although now your contribution for fresh money is lower.

      Thanks

      Ashal

      Reply
3. BanyanFA says:

   July 12, 2012 at 10:31 pm

   I agree with Ashal & Manish. The moment the funds will be available and tagged as Emergency funds, you may end up tapping it for non-emergency uses. If you can’t consider a long term productive investment, you may rather want to leave the funds in the current EPF and let it grow tax free.

   Reply
4. sreejith says:

   July 12, 2012 at 4:12 pm

   Hi Ashal

   Thank you for the answer.

   I plan to put it in Fixed deposits – guaranteed returns, while maintaining liquidity in case of an emergency. The return investment rate would be low, but I am willing to compromise that so that this acts like an emergency fund.

   Another question – What qualifies for continuous service ? I joined Company B after 15 days of leaving company A. Will that be taken as continuous service ?

   Is it good to declare this withdrawal in the returns I file next year as non-taxed income ? Does it matter if I do not declare it at all when filing the next year ITR ?

   Reply
   1. Manish Chauhan says:

      July 12, 2012 at 4:59 pm

      An EPF account which is transferred from company A to company B , then its considered as the extention and the tenure is added , so in your case your EPF account is just one and total 8 yrs old ( 7 + 1) .

      One word of caution here , while your logic of emergency fund creation using this EPF amount might look good , but note that once you label is as emergency and its access it easy , in all probabilities life will give you enough reasons and reasonings why you should use it at some point of time and all the justifications will come into picture .

      If you dont withdraw it , its getting accumulated some where without much knowledge and thats exactly why you should not withdraw it . Thats my opinion ! .

      Also note that while you are in job , you cant withdraw the money, you need to be unemployed for atleast 3 months and at the time of withdrawal to withdraw the EPF money

      Manish

      Reply
   2. Ashal Jauhari says:

      July 12, 2012 at 8:14 pm

      Dear Sreejith, if the PF amount is to be used for emergency funding, it indicates your finance is in mess. My take is same as dear Manish, let it continue & for that emergency funding, start investing on mly basis even in a simple product like bank RD of 6-9-12 months as per your own comfort.

      Thanks

      Ashal

      Reply
5. Ashal Jauhari says:

   July 12, 2012 at 3:09 pm

   Dear Sreejith, as the service was in continuation from employer A to B, the X+Y PF withdraw ‘ll be tax free.

   May I know where do you want to use this PF amount after withdrawing the same.

   Thanks

   Ashal

   Reply

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