AT THE MOMENT EPF Falls Under Exempt 1

AT THE MOMENT EPF Falls Under Exempt

In this post we’ll see a few of the variations between EPF and NPS plus some salient factors about both EPF and NPS. This will help you have a better understanding of these terms. Employees Provident Fund (EPF) Taxation issue raised by the Finance Bill, 2016 has ended now. The federal government eventually withdrew the provision relating to taxing sixty % of the total amount when withdrawn by a worker from his EPF accounts. The essential reason for presenting this provision was to bring similarity in EPF and NPS taxation provisions. At the moment EPF falls under exempt, exempt, exempt (EEE) category while National pension Scheme(NPS) falls under exempt, exempt, tax (EET) category.

Simply saying, both EPF and NPS qualify for tax exemption at the time of adding money to the particular funds as well as at the time of accrual of income to the fund deposits. But at the time of making withdrawals from the money existing tax provisions will vary for the two. Withdrawal in a lump sum from NPS after attaining the age group of sixty is allowed to the extent of sixty % of the full total corpus at the credit of the NPS subscriber.

Minimum forty percent of the credit balance is usually to be utilized compulsorily for purchase of regular pension/annuity to the customer. One hundred per cent cash withdrawal is not allowed. Lump-sum cash withdrawal from NPS before the age of superannuation is restricted to twenty percent only relax eighty per cent is to be utilized for the sale of regular annuity/pension. Lump amount cash withdrawal from EPF accounts during retirement is allowed to any extent according to existing rules.

National Pension System(NPS) was begun by the Government of India for the advantage of the government employees in the entire year 2004 because authorities then didn’t give pension from its own sources to its new employees. EPF is perfect for the workers employed in arranged sector where both employers and employees donate to the account which is maintained by the Employees’ Provident Fund Organization (EPFO). The corpus is invested mainly in fixed-income securities and interest is acknowledged each year to the employees account at a fixed rate decided every year by the EPFO Board.

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There is manufactured no discrimination in between old and new account accounts in issues of income distribution. Interest is credited at an even rate to all or any EPF accounts. The basic purpose of this scheme is to make the retirement fund and, in addition, provide post-retirement pension to the employees. After amendment in the structure in ’09 2009 now any Indian citizen, like the above, can sign up for the structure and contribute to it to avail later years benefits in the form of annuities. The minimal age of admittance is 18 years. No entry is allowed after attaining the age of sixty years.

The reason for this plan is to give a facility of cost savings for old age to all Indian residents and provision of old-age pension as well. A worker cannot open EPF accounts but by using Universal Account Number he can operate it online. It is possible to transfer the accounts after a change of job. Online procedure and opening of NPS account are possible.

In remaining cases membership to the system can be made for the very least amount of Rupees six thousand per season or Rupees 500 per month. There is absolutely no top limit for deposit. Minimum of one membership of Rupees six thousand in a season is compulsory. Minimum amount of a subscription is Rupees 500.

Regular contribution to NPS is not necessary. Interest credited to the account and withdrawal after five completed years of service from EPF accounts is also exempted from taxes. After retirement the employee can withdraw the whole corpus in lump sum without any tax liability. Income accrued to the NPS accounts is not taxable in the tactile hands of the customer.

Post-retirement (following the age group of sixty) withdrawals from NPS is taxes free to the limit of 40% of the account balance. Minimum 40% of the NPS corpus must be mandatorily utilized for the sale of annuity. Rest 20% can either be withdrawn in a lump sum or can be utilized for the sale of annuity.