Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« Service Tax »
Open DEMAT Account in 24 hrs
 Income Tax SFT return filing due date extension: Facility to remain open for a couple of days Latest news
 Income tax filing: Waiting for your Form 16? Here is what you need to know
 Salaried? Rental tax calculation rules you should know before ITR filing in 2023
 What are new tax regime's slabs? Know its limits, benefits, and more
 How much additional tax do you need to pay? ITR filing last date for FY 2019-20
 Income Tax Return Filing: How to file ITR - step-by-step guide
 New Income Tax Slabs for Super Senior Citizens 2023-24: Which rate will apply for ITR now?
 Income Tax Return filing 2023 data: How many Indians aged 18-35 years file ITR?
 Make tax-saving a part of your overall investment plan
 Filing ITR? Maximize Your Tax Savings With These 7 Allowance Benefits
 Extension of time limit for compliance to be made for claiming any exemption under Section 54 to 54GB of the Income-tax Act, 1961 ('Act') in view of the then-Covid-19 pandemic

No tax on PF withdrawal after 5 years of continuous service
August, 06th 2015

I worked in a Chennai-based organisation for four years. Now I am going abroad for work. Since I have not completed five years of continuous service, my provident fund (PF) withdrawal will be taxable. But if I get my Universal Account Number (UAN) and hold the PF for another two years and then put forth the withdrawal request, will I still be taxed?

—Abhishek Kar

The UAN is a 12-digit ‘portable’ number allotted to each PF member. It gives them control of their Employees’ Provident Fund (EPF) account and minimises the role of the employer in matters related to a member’s account. However, this does not have any impact on the taxability of PF withdrawal.

Withdrawal of the accumulated balance from a recognized PF is taxable if the employee has not rendered continuous service for five years or more to the employer. While computing the continuous service of five years, the period of previous employment is also included, if the accumulated balance maintained with the old employer is transferred to the PF account of the new employer. We understand that you have rendered service for four years. Assuming that this was your first job or you have not transferred PF balance, if any, from the previous employer, if you withdraw your PF, it shall be taxable in the year of receipt.

Total of employer’s contribution plus interest thereon will be taxed as salary. Further, the amount of tax benefit claimed under section 80C of the Income-tax Act, 1961, on account of your contribution to the recognized PF shall also be taxed as salary. Also, the interest on your own contribution shall be taxed as “Income from other sources”. Tax rate would depend on your applicable income slab in each of the financial years (FY) during which PF contributions were made. Surcharge and cess, as applicable, for each of the years will also be payable. If the PF contribution is spread over different years, tax rates of those years would be considered.

You would be entitled to avail relief under section 89.

Please note that if PF amount is taxable (presuming that your employer maintains accounts with a recognized PF), tax will be deducted at source at 10% if the withdrawal amount is more than Rs.30,000 and the individual has provided the Permanent Account Number (PAN). If PAN is not available, tax would be deducted at maximum marginal rate.

In case of change of employment where the accumulated PF balance maintained with the old employer (say, company A) is transferred to the PF account maintained with the new employer (say, company B) and later on the accumulated PF balance maintained with company B is withdrawn, the period of service of four years served with company A will also be counted for the five years of continuous services. Accordingly, since the cumulative years of services would be more than five years, the withdrawal of entire PF from company B will not trigger any tax liability.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting