Salvage the PF account you forgot

Salvage the PF account you forgot

Did you transfer your provident fund (PF) account to your new employer the last time you changed your job? Chances are, you didn’t. The Employees’ Provident Fund Organization (EPFO) recently found that over half of the 5.87 crore accounts it manages have had no fresh contributions for three years or more.

Changes in the job market in the past two decades has meant that many workers have multiple PF accounts from past jobs but have not been able to consolidate them —either due to sheer inertia or because of the procedural difficulties.

The government has decided to stop crediting interest in such dormant PF accounts from April this year. Some 3 crore PF accounts with nearly Rs 16,000 crore will be affected, though the absolute number of workers at risk may be fewer.

The EPFO expects nearly Rs 10,000 crore to be withdrawn or transferred from dormant accounts in 2011-12 and has come up with new guidelines for members to claim their locked-up retirement savings.

In case you wish to withdraw your PF and the past employer is available, your claim form has to be attested by the authorized signatory from that firm.

“For many dormant PF accounts, the past employer is not available or the firm has closed down or liquidated,” says Central PF Commissioner Samirendra Chatterjee . The EPFO board has laid out a different claim procedure for such cases. “If the employer cannot be traced, workers must submit an identity proof and a proof of residence. An attestation is also needed from your bank manager about the bank account where your PF savings will be credited,” Chatterjee told ET Wealth.

Official government identity cards such as a PAN card, voters’ identity card, passport, ration card or an Employees’ State Insurance Corporation identity card are acceptable. For address proof, a copy of your electricity, water or landline phone bill or a driving license would suffice.

The EPFO has also put in place a system to check fraudulent claims. For years, several PF offices have suffered from a systemic fraud where savings are siphoned out of dormant PF accounts.

Chatterjee, however, advises workers to transfer the balances from their old PF accounts to their current one. “It’s tempting to withdraw PF balances, but transferring them would make your retirement corpus fatter with the compounding of interest. No other avenue offers capital safety with high tax-free returns,” he says.

Transfers score over withdrawals, especially with just a month left before interest credits on dormant PF accounts stop. Withdrawals may take longer than a month and interest for the period from April 1 till the date of settlement would be lost.

Transfers may also take longer than a month, but requesting a transfer could ensure that you don’t lose any interest irrespective of how long the PF office takes to consolidate your retirement savings.

“If you apply to transfer your past PF accounts before 1 April, then such accounts will be treated as operative even if the actual transfer is pending. We will keep paying interest in these cases,” promises Chatterjee.
Source: Economictimes

No Income tax on additional interest on EPF money

No tax on additional interest on EPF money (diff. of 9.5 and 8.5 %)

The additional quantum of interest on Employees Provident Fund deposits would be exempted from income tax, the LokSabha was informed today. The provident fund trustees had on September 15 decided to raise the EPF interest rate by 1% to 9.5 for 2010-11.

However as per income tax rules interest on EPF is exempted only upto 8.5 % only .so as per present rule though the interest payable is 9.5% but interest exempted is only 8.5% means additional 1 % is taxable in employee's hand .But now in Lok sabha Govt has declared that in rate given in income tax for exemption for interest on EPF will also be increased to 9.5 %

"The matter has been discussed with Finance Ministry and they have informed that they will revise the notification to 9.5% once it is approved by the Government," Minister of State for Labour and Employment Harish Rawat said in a written reply. The decision taken by the Central Board of Trustees of EPF to raise the interest rate would benefit 4.71 crore employees in both public and private sectors.

Central trade unions to oppose taxing of withdrawals from savings schemes

Central trade unions to oppose taxing of withdrawals from savings schemes

The central trade unions will press for shelving of a proposal, that wants to tax withdrawals from savings schemes, including provident funds, at the pre-Budget meeting with Finance Minister Pranab Mukherjee on January 14. “(The) Finance Minister has invited trade unions for pre- budget consultations on January 14,” All India Trade Unions Congress Secretary D L Sachdev told media.
Although the central trade unions are meeting here next week to prepare their charter of demands, he said, “we would definitely raise the issue of Exempt, Exempt Tax (EET) mode for savings schemes”.
The draft Direct Taxes Code (DTC), on which the government has invited comments from public, proposed to tax all long-term savings schemes at the time of withdrawal by the subscribers.
Currently, there are no taxes on long-term savings and pension schemes. Besides EET issue, Hind Mazdoor Sabha (HMS) Secretary A D Nagpal said, “We will also demand for higher income tax slabs to provide relief to the working class.”
As part of the budgetary exercise, the minister meets the representative of different interest groups like economists, industrialists, trade unions etc to get their views on the budget. The trade unions, Sachdev said, would also press for the creation of a National Security Fund for urorganised workers in the country.
In view of unionists the funds should have a corpus of a size equal to three per cent of Gross Domestic Product of the country for the welfare of these workers.
The other major issue which could rock the meeting, is imposing service tax on the contributions made to the Employees Provident Fund scheme being run by the country’s largest retirement fund manager Employees’ Provident Fund Organisation (EPFO).
The issue came to light when some months ago, the Central Board of Excise and Customs slapped EPFO with a notice for not paying service tax on the contributions to these scheme. The scheme has around 4.7 crore subscribers across the country.