For many salaried Indians, the Employees’ Provident Fund (EPF remains one of the largest long-term retirement savings pools. If you become a Non-Resident Indian (NRI), your EPF account does not automatically get closed, but the way it is treated under Employees’ Provident Fund Organsation (EPFO) rules changes.
The rules depend on an individual’s employment status, citizenship, and the country they move to. From EPF withdrawals and tax implications to social security agreements signed by India with other nations, here’s a detailed explanation on what happens to your EPF account after becoming an NRI.
What are your options?
When an Indian resident becomes an NRI, their EPF account remains active. However, the rules governing the contributions, withdrawals and account operations change. Here are some key EPF rules NRIs should know:
- NRIs cannot continue contributing to their account if they are no longer employed with an EPF-covered Indian employer.
- The EPF balance will continue to earn interest until the funds are withdrawn or transferred by the account holder, subject to EPFO rules.
- NRIs have the option to withdraw their entire EPF balance, however its advisable to wait for at least 2 months after moving abroad before initiating a withdrawal, which ensures EPFO records reflect the individual’s updated employment status, according to Bajaj Finserv.
- In certain cases, the EPF funds may also be transferred to an International Social Security Agreement (ISSA) country, if applicable. This arrangement is available only in selection countries such as Belgium, France, Germany, Switzerland, Netherlands, among many others.
What is the eligibility criteria to make an withdrawal
To be eligible to withdraw EPF funds after becoming an NRI, individuals must meet certain eligibility conditions and submit the required documents as part of the claim process.
- The individual must have been an EPF member while employed in India
- Their residential status must be officially classified as
- A valid PAN card and an active Indian bank account are required.
- Address proof such as electricity bill or rental agreement may be needed.
- Bank statement of the Indian bank account linked to the EPF account should be produced.
- Proof of employment termination or a registration letter have to be submitted.
- A copy of the passport with visa stamping is required.
- Form 121 (previously Form 15G and 15H) may be required to avoid TDS deduction if its applicable.
Process of EPF withdrawal for NRIs
The EPF withdrawal process for NRIs can be completed online through the member portal. Here are the key steps involved:
Step 1: Log in to the EPFO member portal using your UAN (Universal Account Number) and password.
Step 2: Select the online claim option and fill out Form 19 for EPF withdrawal or Form 10C for pension withdrawal.
Step 3: Upload all the required documents mentioned in the portal.
Step 4: Submit the application and save the claim reference number for tracking purposes.
Step 5: The EPFO will verify the application and process the withdrawal request.
Once the request is approved by the authorities, the funds will be credited to the linked Indian bank account. The entire process usually takes 7-10 days.
How are the EPF proceeds taxed in India?
However, NRIs may still need to check the tax rules in their country of residence, as the withdrawn amount could be taxable there depending on local laws.
If you have completed five years of continuous service in India, the entire EPF withdrawal amount, including the employee’s and the employer’s contribution, as well as the interest, is fully exempt from tax in India. In such cases, no Tax Deducted at Source (TDS) is applicable on the withdrawal.
However, if the EPF balance is withdrawn before 5 years, TDS of 10% is applicable for those with a valid PAN card, and a higher interest rate for those who do not have a PAN. NRIs can also use Double Taxation Avoidance Agreement (DTAA) to reduce this tax burden, if applicable.