Tax on Provident Fund Withdrawal

by Manshu on March 14, 2011

in Tax

Got the following question in an email which Gurpreet responded to.

 

I have changed job and new employer has opened new PF account. I have a choice of withdrawing old PF amt or transferring to new.

If I withdraw PF, will it be treated as taxable income? If yes, can I save tax by investing partially in any government schemes / bonds?

Here is the response.

PF withdrawal is taxable if a person has worked in the company for less than 5 years. Tax cannot be saved even by investing in any govt schemes / bonds. It just gets added to income from salaries, and then the taxability will depend upon the Gross Income of the assessee.

 

Head Statutory PF Recognized PF UnRecognised PF
Employers contribution to PF Exempt from tax Exempt up to 12% of salary (Basic +DA) Exempt from tax
Deduction under sec 80C Available Available Not available
Interest credited on PF account Exempt from tax Exempt up to 9.5% Exempt from tax
Lump sum payment received at the time of retirement or termination of service Exempt from tax Exempt from tax: Only employees share of contribution is exempt
a. If the employee has worked for at least 5 years with the employer
b. If the service is terminated on account of ill-health or by contraction or discontinuance of the employer’s business or any other reason beyond control of employee
c. If the employee transfers the balance in his PF to his new PF a/c maintained by his new employer

Any thoughts on this – has anyone done this?

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{ 318 comments… read them below or add one }

Sumit August 20, 2012 at 11:20 am

I have joined Co. A on 12Feb 2007, will be leaving Co. A on 3rd Feb 2012, thus fall short of 8 days of continuous service of 5 yrs. Now, i joinined in Co. B on 6th of Feb 2012 I have not transfered the PF amount to Co B. In such case withdrawl of the PF amount is taxable in my hand?

Reply

bemoneyaware December 13, 2012 at 5:25 am

Did an article on Tax on EPF withdrawal covering different kinds of Provident Funds (Recognised, Unrecognised), Overview of EPF or Recognised Provident Fund, when is withdrawal exempt from tax, Tax on withdrawal before 5 years, TDS on withdrawal amount, Relief under Section 89.

Reply

Rahul Tripathi June 28, 2013 at 8:07 pm

Hi,,

My query is regarding PF withdraw. I worked for my Ex-company for more 6.5yrs and after completing 60 days , I applied for PF withdraw.

My Ex-company had a EPF trust.

My accumulated PF amount was more than 2LAC but I recieved it 1.5 LAC only and remaining amount was deducted as TDS plus CESS.

Please confirm if after 6.5yrs , TDS should be applicable for me.

An early response will be highly appreciated and if I can get that amount by any means , please do let me know.

-Thanks,
Rahul

Reply

nagaraja m March 19, 2014 at 4:50 pm

I have resigned from my current job my date of joining is 07/08/2006 and my last date in the current company is 15/11/2013. I Want to with draw the amount.i was with the company for 7 years 03 months and 20 days .

if i am withdrawing the PF whether it is taxable or not?

If taxable how much taxable ?

Reply

Kishen May 20, 2014 at 2:30 pm

Hi Vijayakumar,

Do you know the email id of the person/team who I can contact in capgemini for PF details.
Any information is very helpful.

Regards

Reply

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