Now, I want to withdraw the accumulated EPF funds for purchasing a plot. Most EPF balance is with Company 1. If I transfer EPF of both Company 1 and Company 2 to Company 3 and then ask for advance for plot construction, will it be considered taxable? Please advise.

From a tax perspective, as per Section 10(12) read with Rule 8 of Part A of Fourth Schedule of the Income Tax Act, 1961 (the Act), the accumulated PF balance due and payable to the employee i.e. balance to his credit on the date of cessation of his employment, is exempt from tax if he has rendered continuous service for a period of five years or more.

Where there are multiple PF accounts and the PF balances are transferred to the most recent PF account, the cumulative period of employment pertaining to all such PF accounts is required to be seen for the purpose of evaluating whether the employee has rendered continuous service for a period of five years or more.

In the instant case, where the PF balances is be transferred to Company 3 (the latest employer), the cumulative period of employment shall be considered as more than five years. Accordingly, any permissible withdrawal/advance from the accumulated balance shall be exempt from tax.

Alternatively, if you withdraw the balance from PF account maintained with Company 1 (without transferring to Company 3), the balance accumulated till your last date of services with Company 1 would anyways be tax-free as you had completed more than five-and-a-half years of service with Company 1.

Kindly let me know whether one can deduct/ adjust municipal property tax paid from the taxable income if staying in a self-occupied house. If so, under what section of I-T Act? I am a retired pensioner staying in my own apartment.

—Name withheld on request

 

As per the provisions of Section 23(1) of the Income Tax Act, 1961, deduction of municipal taxes is available from the gross rent to determine the net rental value (i.e. annual value) which is considered for the purpose of taxation.

However, the annual value for a self-occupied property as per Section 23(2) is to be considered as NIL.

Accordingly, in your case, the annual value for a self-occupied property will be considered as NIL without any deduction towards municipal taxes.