Are withdrawals from EPF by NRIs taxable?

If cash parked within the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) will not be withdrawn even after three years of leaving India and till the age of 58 years, will the curiosity on EPF proceed to  accrue? 

If the cash is withdrawn, will or not it’s topic to TDS deduction even when 5 steady years of service have been accomplished in India earlier than changing into an NRI? From the PPF account opened whereas being a resident, would the quantity acquired on maturity by an NRI be topic to TDS or be taxable in India?

— Name withheld on request

As per the present PF Scheme, a PF account is classed as an in-operative account and doesn’t earn additional curiosity the place an worker retires from service after attaining the age of 55 years or migrates overseas completely or dies and doesn’t apply for withdrawal of his amassed stability inside 36 months. Until such time, curiosity will proceed to accrue on the PF balances, nevertheless, no curiosity will accrue as soon as the account turns into an in-operative account.

As per the provisions of the Income-tax Act, 1961, the amassed PF stability due and payable to the worker on the date of cessation of his employment, is taken into account as tax-exempt if he has rendered steady service for 5 years or extra. Hence, no TDS must be relevant on the amassed PF stability due and payable as much as the date of cessation of employment.

However, primarily based on judicial precedents, any accretions, within the type of curiosity, to such PF stability, from the date of cessation of employment until withdrawal might be thought-about as taxable revenue. Whether TDS is deducted on the stated curiosity revenue, accrued post-cessation of employment would depend upon the place adopted by the payor, non-public belief maintained by the employer or the regional provident fund commissioner—and the quantum of curiosity, amongst others.

As per the PPF Scheme, an NRI will not be eligible to open the PPF account, nevertheless, a resident who after opening the PPF account, subsequently turns into non-resident, could proceed to carry such account until maturity. As per the provisions of the Act, cost acquired from the PPF account is exempt from tax regardless of the residential standing.

As no TDS is deducted on Kisan Vikas Patra and curiosity is payable on maturity, how can a taxpayer present curiosity accrued in ITR?

                                        — Dolly Moga

The Income-tax Act, 1961, offers for taxation of revenue from different sources (like curiosity) both on a money or accrual foundation on the possibility of the taxpayer.

If the taxpayer opts for taxation on a ‘cash basis’, curiosity from Kisan Vikas Patra (KVP) could also be taxed within the 12 months of its maturity on the slab charges which might be relevant in that 12 months for a person. On the opposite hand, the taxpayer might also select to pay tax on such accrued curiosity, calculated foundation of the relevant rate of interest, on yearly foundation on the slab charges which might be relevant in these respective years for the person.

Parizad Sirwalla is associate and head, international mobility companies, tax, KPMG in India.

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