Expatriates from some countries may soon be able to withdraw their PF (provident funds) before they reach 58 years.
The ministry of labour & employment has issued a notification last month (October 2012) allowing PF refund for expatriates coming from countries that have SSA (Social Security Agreements) with India.
SSA with 12 Countries..!
As on date, India has SSA with 12 countries. Out of this, SSAs with 8 countries, which include Belgium, Germany, France, Switzerland, Luxembourg, Denmark, Korea and the Netherlands have come into
effect.
The SSA with Hungary, Czech Republic, Finland & Norway are yet to come into force. Earlier, expatriates could withdraw the amount only after they had achieved 58 years or under specified conditions.
PF fund refund is allowed on completion of the Indian assignment & the amount can be received in expatriate fs bank account directly or / through the employer, the ministry of labour & employment notification said.
Moreover, the number of years of service in a SSA country will be combined with the services in India for determining pension eligibility. With this notification, the PF amount can be withdrawn on completion of the Indian assignment which has made the expatriates happy.
Mr. Vineet Agarwal, ED, KPMG said, '' It is important to note that this benefit is available for expatriates coming from countries with which India has signed an SSA."
From non - SSA countries, the expatriates will be able to withdraw their provident fund only at 58 years or under specified conditions.
As per ministry of labour notification, expatriates from SSA countries shall be eligible to withdraw PF upon cessation of employment with a covered establishment or a company which is covered under EPF (employees provident fund) in India.
As long as the expatriate continues to work for a covered establishment in India, he will have to continue depositing PF and can withdraw the same only after completing the Indian assignment.
The change will benefit all foreign nationals who have contributed to the PF in India before the SSA between their home country & India came into force.
Mr. Sonu Iyer, Partner & National leader, Human Capital, Ernst & Young said, '' It will no longer be mandatory for international workers to hold an Indian bank account to claim the PF withdrawl"
For example, let us assume Mr. Adlar, a Dutch national was seconded to India for a 2 year assignment on April 1, 2011. As on April 1, 2011, there was no SSA between India & the Netherlands.
Therefore, Mr. Adlar was mandatorily required to become a member of the PF in India as an international worker. The SSA between India & the Netherlands is effective from December 1, 2011. Mr. Adlar then obtained a certificate of coverage in the Netherlands & was exempt from making PF contributions in India.
Now, Mr. Adlar will be eligible to withdraw from PF on completion of his Indian assignment. Also, Mr. Adlar can now claim refund from the provident fund through his employer, said Mr. Sonu Iyer.
The Notification Fine Print..!
Following this circular, all eligible international workers who have paid contributions since November 2008 & have since finished their assignment in India, can apply for PF withdrawal.
The PFs department, however, has not issued any separate instructions with respect to documents submitted to claim PF refunds. As of now, expatriates and the employer can file a joint application in the prescribed Form No 19.
This form does not require any supporting documents to be submitted along with the application. An important aspect that requires clarification is whether provident fund contributions from 2008 can be withdrawn or / only the contributions made after SSA has become effective can be withdrawn.
Mr. Vineet Agarwal, ED, KPMG also said, '' We may expect some clarifications shortly as all SSAs which India has with countries have come into effect only after 2008".
Income Tax Implications..!
The PF fund amount is taxable in India if the contributions were for less than 5 years. If the individual takes up another job in the home country & applies for a PF refund while his total tenure has been less than 5 years in India, then the amount withdrawn shall be taxable.
Withdrawal from PF is exempt from tax in any of the following situations only...!
* If the employee has rendered continuous service with the employer for the period of 5 (Five) years or / more.
* If the employee has withdrawn from PF by reason of ill - health, or / any other reason beyond his / her control.
* If on termination of employment, the refund amount is transferred to the PF of another employer in India.
If the individual takes up another job in India & works for more than 5 (five) years in total in India, the lump sum amount will be exempt from income tax, provided contribution made in the first employment is transferred to the PF account with the second employer.
Src: Vidyalaxmi, ET Bureau
No comments:
Post a Comment