Tax on Provident Fund Withdrawal

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?

327 thoughts on “Tax on Provident Fund Withdrawal”

  1. Mr. Bhushan Kumar my relative withdraw their PF Amount Rs. 76069.00. on Dec.2015. Is their full am0unt will be taxable or not. If full amount not then on what amount the Tax will be applicable

  2. I have nearly 20 years of continuous service and I have withdrawn Rs 15 lakhs from PF for purchase of flat. Do I have to pay taxes for? The second question is whether I will get tax exemption for my present contribution to PF as a withdrawal has happened in this FY? An early reply will be helpful in my tax planning. Thanks in advance…

  3. Hi,
    i Worked for a company since july 19 2010 to Jan 19 2015 (4.6 years), till now i have not withdrawn my PF , should i need to wait till July19 2015 to withdraw the amount as it will be 5 years , will it be taxed if i take now ?

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