Employee Provident Fund (EPF) Guide for NRIs

To advance your career, you may need to switch jobs or even countries for better pay. However, moving away from India has important financial implications, particularly regarding your Employee Provident Fund (EPF). As an employee, you've likely contributed to your EPF, but once you become a Non-Resident Indian (NRI), further contributions are not possible. So, what happens to your accumulated EPF funds, and how can you withdraw them? Let's explore your options.

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What is EPF?

Employees Provident Fund (EPF) is a retirement benefit scheme introduced by the government of India in 1952 to ensure all employed individuals have a source of income post-retirement. The scheme fulfills three objectives: wealth generation, pension benefits, and insurance. Under the scheme, you and your employer will contribute 12% of your monthly basic salary until you retire. This fund will attract interest, as decided by the Employees' Provident Fund Organization (EPFO). At present, your EPF deposits earn 8.25% interest per annum.

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What happens to the EPF Account for NRIs?

Once you become a non-resident Indian (NRI), you can no longer contribute to your EPF account. Moreover, you can no longer keep the account active without contributing to it. However, your money is not lost, and you have two options for your accumulated funds.

The first is the withdrawal of your EPF balance immediately without any waiting period. The second option is to transfer your EPF account to your new employer in the country of your residence to continue your savings. However, the transfer option is currently only available for Belgium as India has a Social Security Agreement (SSA) with it. Hence, if you are moving to any other country apart from Belgium, you must withdraw your EPF balance.

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Rules of EPF withdrawal for NRIs

Without a waiting period, NRIs can withdraw their EPF balance in full immediately after their residence status changes. The following are some of the EPF withdrawal rules for NRIs.

• Eligibility: To be able to withdraw your EPF balance, you must be an NRI, and you must have left India for employment or to settle abroad.
• Proof of employment abroad: You must provide proof that you are leaving India to work or settle abroad to withdraw your EPF balance in full.

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The process of EPF withdrawal for NRIs

You can withdraw your EPF balance either online or offline. However, before you start the withdrawal process, you must ensure your Passport and visa are in place.

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Offline process

You can download the EPF withdrawal form from the EPFO website or take it from your employer. There are two types of forms available: the Aadhar-based form and the non-Aadhar-based form.

If your Aadhar is linked to your Universal Account Number (UAN), you can submit the filled form and the necessary documents to the nearest EPFO office. However, if your UAN is not linked to the Aadhar, you will require your employer's endorsement before submitting the application to the EPFO office. While filling out the form, make sure you give the reason for parting from the job as “Abroad Settlement”.

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Online process

The online process only works if your UAN is linked to your Aadhar. If your UAN is already linked to your Aadhar, you can withdraw your EPF balance through the UAN unified portal. Alternatively, you can also withdraw your EPF balance through EPFO's UMANG mobile application.

While filling out the online application, make sure you select “Abroad Settlement” as the reason for quitting the job. During the form submission, make sure you upload clear scanned copies of all the documents in JPEG or PDF format. Finally, verify through OTP, which you will receive on your mobile number or email ID, to complete the process and get the EPF balance into your account.

In both the online and offline processes, once the documents are thoroughly verified, the EPF balance will be transferred to your bank account in the next two weeks.

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Documents needed for EPF withdrawal

To be able to withdraw the EPF balance, you must submit all necessary documents. Some of the necessary documents are provided below:

• Aadhar Card
• Indian Passport along with visa of the country you will be a resident of
• Proof of date of birth
• Local Indian address proof
• Universal Account Number (UAN): if UAN isn't allotted, then a certified copy of the EPF passbook
• Proof of date of exit from last employment
• Bank details with the cancelled cheque
• PAN Card
• Marriage certificate (only for women)

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Tax implications on EPF withdrawal for NRI

The tax implications on EPF withdrawal for NRIs depend on multiple factors.

• EPF withdrawal after completing 5 years of continuous service: If you have completed 5 years of service in India, no tax will be levied, and no tax deducted at source (TDS) will be applicable.
• EPF withdrawal before completing 5 years of continuous service: If you haven't completed five years of service in India, then EPF withdrawal will be taxed. No TDS will be deducted if the EPF amount is less than Rs 50,000. If the EPF amount exceeds Rs 50,000, then TDS will be deducted. If your PAN is linked to your EPF account, 10% TDS is deducted, and if it is not linked, then 30% TDS is deducted.
• Tax on interest earned on EPF balance: Any interest paid to you on your EPF balance after the last date of employment until the withdrawal date is taxable in India.

If you want to repatriate the amount to your country of residence, then make sure you know the Double Taxation Avoidance Agreement (DTAA) between India and your country of residence. The DTAA ensures you do not pay tax on the same income in two different countries.

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Conclusion

Once you become an NRI, you cannot keep your EPF account active without making any contributions. However, you cannot contribute to the EPF account as an NRI. Hence, it is best to withdraw the entire balance immediately once you plan to move abroad. You don't have to wait until you move abroad; you can start the withdrawal process immediately after you get your visa. This is because the EPF withdrawal process is very lengthy and time-consuming.

In case you do not withdraw the EPF balance immediately, any interest accumulated from the last date of your employment in India until the withdrawal date is taxable in India. In such cases, check the DTAA agreement between India and your country of residence to avoid paying tax on the same income.

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Frequently Asked Questions

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Can NRIs withdraw their EPF while living abroad?

NRIs can withdraw their EPF balance through the EPFO website or UMANG application, provided their PAN is linked to the UAN. If the PAN is not linked to the UAN, they must follow the offline process.

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What is the EPF withdrawal process for NRIs?

You can withdraw your EPF balance as an NRI either online or offline. In the online process, make sure your PAN is linked to your UAN. The online process can be initiated through the EPFO website or the UMANG App. For the offline process, you must submit the withdrawal form at the nearest EPFO website.

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Are EPF withdrawals taxable for NRIs?

EPF withdrawals above Rs 50,000 made before completing five years of service in India are taxable at either 10% (if PAN is linked) or 30% (if PAN is not linked).

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Can NRIs continue to contribute to EPF after moving abroad?

No, NRIs cannot contribute to their EPF account after moving abroad. Moreover, they are supposed to withdraw their balance immediately to avoid paying tax on the interest earned after their last date of employment in India.

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What happens to an NRI's EPF account if they return to India?

If you are temporarily moving abroad, do not withdraw your EPF balance. Instead, you can leave the EPF balance as is. Your account will be inoperative for three years but can be activated once you are back in India. In the meantime, your EPF balance will continue to earn interest in India.

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How can NRIs check their EPF balance online?

You can access your EPF account online as an NRI through the EPFO portal. You can check your balance and make withdrawals directly on the EPFO website or UMANG App.

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Can NRIs nominate a beneficiary for their EPF account?

NRIs can nominate a beneficiary for their EPF account who can receive the proceeds upon their demise.

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