a talk on EPF..”

EPF tax stopping people to invest in real estate :

With the government recently coming up with the budget stating the proposal to tax interest accrued on 60% of EPF, it seems government is intending to divert people to invest in pension products and not towards the real estate.

Salaried people contribute a certain percentage of their salaries to EPF account every month and their employers add 12% to it. An individual is permitted to withdraw the full amount at the time of retirement and partially during his service life for children’s education, marriage of self etc.

Financial advisors point out that if a certain % of population wishes to convert 60% of the corpus on retirement into annuity, they may have to pay tax to get their own money. If they buy a house or pay off a loan using the EPF amount, they are likely to use the remaining sum for pension plans.

People are eligible to withdraw a portion of EPF if they have a 5years of service. Funds equivalent to 24 months and 36 months of salary can be withdrawn for buying a plot and house/apartment respectively.

Technically a person can avail of 24 months of EPF for 5 years or whatever is available to his/her account whichever is less.

The government may come out with a clarification whether withdrawal of EPF before retirement for a specific purpose will be taxable or not. As per the rule introduced last month, if an employee decides to quit and needs to access EPF, he can only withdraw his share and not that of employer which can only be accessed after 58years or retirement whichever is later .

Also about the transfer of amount enabling provision. The government has introduced that the EPF amount can be transferred to national pension scheme.

Example: if the corpus is rupees 100, 40% withdrawal of the corpus will be tax free but interest earned on the remaining 605 may attract a tax under the new proposal.  This can prove to be a deterrent for people wanting to put in their EPF money for real estate. “Rather than buying real estate, the intention of the government here seems to be to encourage people to move towards buying a pension product”

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sanyagulati1991

finding a direction isin't easy, yet holding a torch to find one! (walking............!!!!!)

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