Most employers do not cancel the PF corpus because they think they will earn interest on the same thing, which is still tax-free.
For NPS, you can withdraw up to 60% of the corpus at the time of retirement, which is fully tax-exempt.
I'm going to retire next year. I hope to have deposited some 1.25 crore in the Provident Fund for Employees (EPF) and some 30 lakh in the National Pension Scheme (NPS) by the retirement date. I'm going to get around 60 lakh from superannuation funds as well.
What would be the most tax-efficient way to get the retirement income? And, do I need to draw a pension number in the form of an annuity? What would be the tax liability for the quantities of the annuity and the lump sum?.
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Through implication, the retirement income is tax-efficient in nature. Nonetheless, for better planning, it is good to understand the full tax effect. EPF is completely exempt at the time of retirement if it is discontinued after a continuous service of five years.
In your case, at the time of retirement, you are retiring, and therefore, prima facie, it should be tax-free. Therefore, other workers do not remove the PF pool because they think they will earn interest on the same, which stays tax-free.
Post any active contribution to the EPF, however, the interest earned on the corpus is taxable and you are therefore recommended to withdraw the same post retirement.
Up to one-third of the cumulative assets can be deducted at the time of retirement and the remaining sum will be transferred into an annuity fund where there are various options available on the basis of which a daily annuity may be issued at a set period. At the time of retirement, the lump sum collected is tax-free.
Up to one-third of the cumulative assets can be deducted at the time of retirement and the remaining sum will be transferred into an annuity fund where there are various options available on the basis of which a daily annuity may be issued at a set period. At the time of retirement, the lump sum collected is tax-free.
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