Do a cost-benefit evaluation once you resolve on reimbursement of loans

I’ve served three employers (together with the present one) between 2015 and 2020, with no hole in employment. Recently, I transferred the staff’ provident fund (EPF) from the account with employer 1 to that of employer 2 after which this collected EPF to the account with employer 3. Can I now declare advance withdrawal? Will the EPFO workplace take into account the entire size of employment as 5 years, as the primary contribution was made in 2015 by employer 1? Do they take into account the age of common account quantity (UAN) creation?

—Vicky Rawal

You have accomplished 5 years of steady service. And sure, the service underneath the earlier employers can also be thought-about to calculate the continual interval of service. And in case of any withdrawal, the EPFO will take into account the service rendered as 5 years and never the service of the present employer.

My father not too long ago handed away, and I’ve acquired his pension of ₹38 lakh. I’ve a automobile mortgage excellent stability of ₹10 lakh, a house mortgage excellent stability of ₹28 lakh (6.7%), a top-up mortgage excellent stability of ₹22 lakh (7.8%). I don’t plan to shut all my loans however need an optimum resolution. Currently, I get a tax rebate on a house mortgage, however this could change subsequent yr; prepaying the automobile mortgage will fetch a penalty. I’m uncertain if I ought to make investments some cash in a gold mortgage scheme, put some cash in public provident fund (PPF), some in debt mutual funds. I’m not certain if investing within the share market is a smart resolution contemplating there could possibly be a market correction quickly. I’m a risk-averse investor.

—Name withheld on request

It is really useful that the loans be pruned down, and a cost-benefit evaluation be achieved to resolve on the reimbursement of loans. The benchmark, on this case, would be the reinvestment return. As you’re risk-averse, the return on a debt mutual fund will likely be, let’s say, a median of 6%. And the bottom line is to verify if the price of borrowing is increased than the mentioned price. In your case, a automobile mortgage could be repaid, as the price of borrowing will likely be increased, however as there’s a prepayment penalty, it must be evaluated accordingly. Likewise, the top-up mortgage can be thought-about for reimbursement as you aren’t getting any tax profit, thereby the price of borrowing stays the identical and is increased than the potential incomes capability. Only the housing mortgage could be continued, as the online value of borrowing submit tax financial savings will likely be decrease than the potential earnings. The surplus of the corpus acquired out of your father’s pension account can then be reinvested in PPF and debt mutual funds. You may even take into account balanced benefit funds that dynamically handle the fairness publicity. However, that is to be achieved solely you probably have a long-term funding plan and might take into account taking some threat to the portfolio. This will allow you to generate inflation-adjusted returns if held for the long run.

I retired in February 2019. and acquired the ultimate fee of workers’ provident fund (EPF) on 11 July 2019. Will the ultimate fee of EPF acquired be taxable, since I’ll file my earnings tax return for FY20?

—Name withheld on request

In your case, an important factor is the interval of steady service, i.e., you probably have retired out of your job after the completion of at the very least 5 years of steady service, which additionally consists of any change in employment in the course of the interval of 5 years. In that case, the total and last fee of provident fund will likely be tax free in your arms.

Surya Bhatia is managing companion of Asset Managers.

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