01 August 2018

If you are a Salaried Person then You must know this Dangerous clause in EPF

Employee Provident Fund (EPF) is a social security tool for employees. Probably, this is one of the best investment option as well. The PF subscription upto 150000 is non Taxable. Handsome interest is also earned on this saving option. It also serves the purpose of emergency reserve for may of the salaried class people. Many employees use the accumulated EPF as an option to meet the milestone in life like buying a house, marrying daughter, higher education of children etc. Due to mandatory contribution of 12% by each (Employee and Employer) makes it another forced investment option which finally linked to social security. But, you must read the below clause which may be a cause of concern for you.

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Due to excellent interest earned on EPF, many of employees leave the money in PF account at the time of retirement. This gives them great saving option as the money is just multiplying by getting 8.5% or more interest rate.As per Govt ruling, one can keep the money in PF account upto 36 months at the time of retirement. As per the new PF rules, an EPF account will become inoperative and not be eligible for interest after 36 months from the date the individual migrates abroad permanently or the date of retirement after attaining the age of 55 years. 
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However, recently Bangalore bench of Income-Tax Appellate Tribunal (ITAT) has ruled that interest earned after cessation of employment of individual will be taxable. This is indeed a blow to people who keeping the amount in EPF account for getting good interest rate . The real interest earned on such account will be badly affected and may result in appx 6% interest in real terms. Therefore, if you are opting for such saving options/plan, please reconsider this to check for other investment options. Happy Investing.

Stay Tuned. 

Knowledge Max

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