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?
Hii
I have joined company on 10.4.2006 and transferred to another company on 1.4.11. My new PF a/c has been opened in another company in April 11. Now I want to withdraw my PF balance of earlier account. Will it be taxable. Thanks in advance for reply.
Hi Nitin,
A small clarification : When u joined the new company did u get a new a/c opened for PF…if yes, then did u get it transferred or not…..if u get it transferred then it will not be taxable…..
If u want to withdraw it then it will not be taxable if u’ve worked in ur previous company for more than 5 years…otherwise it will be taxable…
thanks,
gurpreet
I applied for PF withdraw, the claim status is showing it in progressed , when can I expect to in hand OR how long it will take to deliver this amount,
Hi Yoga,
Transfer does take time….i’ve heard that it took even couple of yrs to get it transfer….so not sure abt exact timeline….u can either contact ur earlier PF office (u can take their no from ur previous HR) or contact ur current HR..
thanks & regards,
gurpreet
Thnak you Gurpreet for your kind advice. I need some more adivce or clarity from you
The PF in the earlier company is under ” Company Trust” in Delhi . The curent employer/ New employeer is likely to open the PF with Govt RPFC , Maharstra.
1) Will there be any difficulty in getting transfer from Delhi to Maharsta
2) What will be normal time required to transfer from Delhi to MH
3) Is this transefer automatic by default on should i have to run pillar to pillar chase people.
4) How will i get confirmation that PF has been transferred in to my new PF account
Thnaks for your help
Guru
Guru
Hi Guru,
Normally, there’s not much difficulty in getting the transfer….it only takes time (could be months)….so I think for all ur queries consult ur HR who’ll b d Best person in answering these ques…..u won’t hv to chase any people except ur HR….they’ll only confirm once ur transfer is complete
thanks & regards,
gurpreet
Thnak you so much Gurupreet, Shall apprevciate if you could advice on the following:
1) My Current employer do Not have any PF . They are Proposed to open the PF account some time latter after 6 Months. This mean i am not going to contribute any money on PF for next 9 Months. If i transfer after nine months , then how long should i work to withdraw PF without Any Tax liability
2) For past 4 Months, i am not contributing PF due to the resaon the same PF account is not avialable with current emplyer. My Current PF is with Company Trust in Delhi and In case i change a job in Oct-2011 and transfer the funds to the new Compnay PF account maintained with RPFC, Mumbai, then How long will it take to get the funds transfeered to new PF account from Delhi to Maharastra. How long i should i work with New company so that i can withdraw without TDS deduction
Guruji
Hi Guru,
Since, u’ve already worked/contributed PF for 4 yrs & 10 months, so u need to contribute for 2 more months only, which means, once ur a/c with new employer is opened then after 2 months of contribution ur withdrawal will not be taxable..
Thanks,
Gurpreet
Dear Sir,
I worked in a company A for 4 Years and 10 Months. I have resigned from this Company A and till date my Full and final settelement has not been made . The details are as follows:
Date of Joing the Company: Aug-2006- PF Contrbution Start Date
Date of Leaving company : May-2011- PF contribution end date
Number of years in service/ PF contribution: 4 Year 10 Months
If i get the Full and final setellemt after PF deduction in the month of Sep,2011, will it be deemed to be contributing PF for 5 years in the same PF trust/ PF Number , so that any withdrwal of PF need not attract Tax Deduction
Hi Guru,
I don’t think that u’ll be deducted any PF after May’11…so technically ur period of deduction of PF is not 5 yrs….hence uless u get it transferred it’ll be taxable (if u withdraw it)..
Regards,
gurpreet
Hi,
I have started my career from Apr’2007 and i worked till Dec’2009 for a company A,
I have transfered the PF from A to company B account (I’m working here from Jan’2010) I will continue here till Apr’2012, so if I withdraw PF after Apr’2012 will it be taxable?
FPF is not transfered to current PF account what would be the procedue to do the same?
Thanks in advance,
Nagesh.
Nagesh,
It will not be taxable…for transferring EPF u can contact ur HRD, they’ll let u know the procedure…
thanks & regards,
gurpreet
Hi,
I worked with company A for 2.5 years & then joined Company B. After joining Company B, I got my company-A PF transferred to Company B pf account.
I resigned from company B after 4 years. Now,I want to withdraw the whole PF. will it be taxable & if yes, at which % rate it would be taxed.
Please guide.
Thanks
Jatinder Singh
Jatinder,
Since u’ve transferred ur PF and now ur total period of service is more than 5 yrs, it will not b taxable…
regards,
gurpreet
Hi Gurpreet,
I worked for company A for 4 yrs and 8 months. Then I joined company B and worked there for 1 year. I transferred my PF from Company A to company B. Now I have resigned from Company B and want to withdraw the PF money. What will be tax implication? Will I be taxed for all amount or just for the one year where I worked with Company B?
Kindly clarify and thanks in advance.
Regards, Kaustubh Khandekar
Hi Kaustubh,
Unfortunately the whole amount is taxable as once u transferred ur PF, it becomes a part of ur new PF a/c (new employer), and again the timeline of 5 years becomes applicable for withdrawing the EPF…
Thanks & Regards,
Gurpreet
Hi,
I think it will not be taxable. Because you served a total of five years.
Shinoj,
Apologies, yes ur correct….it will not b taxable..
regards,
gurpreet
no gurpreet, i think u were correct earlier… I have gone thru some PF tax rules in one TAX book and it clearly stated that the employement should be with the same employer for 5 yrs
Hi Malika,
The IT act says, the PF withdrawal is taxable if it is withdrawn b4 serving 5 yrs of service with the employer….however if u work for less than 5 yrs and get it transferred to ur new employer than it is not taxable…Subsequently if u decide to withdraw it then while calculating the tenure of 5 yrs the employment with the previous employer will also be considered, since u transferred the PF and didn’t withdraw it….
I hope this clarifies…
Thanks,
Gurpreet
Hi ,
I have worked xyz Pvt company 4.10 years. after that i shifed my job currently am working in new company. i have plan to withdraw my previous company PF amount (approx 2 Lac)
1. is it taxable?. if its taxable means how much percentage ?
2. if i withdraw the PF amount after 2 months it will complted 5 years , in that case my PF is it taxable ? but my last company exp is 4.10 years only.
Thanks in advance !!
Regards,
Senthil.
Senthil,
for PF to be exempt either u should get it transferred or ur tenure with the company should be more than 5 years, It does not matter if u withdraw ur PF after 5 years. U should work with that co for at least 5 years.
Thanks,
Gurpreet
Hi Gurpreet,
My question is almost similar to Mr.Sharma’s. I withdrew my PF before completion of 5 years. The total amount is employer contribution + employee contribution + interest on both. TDS was deducted on the total amount. I received a Form 16 from EFP trust of my employer. But, only employer’s contribution and interest on both are shown as income. Employee’s contribution is not shown at all (i.e. not even shown exempt under Section 10). When asked for clarification they said – “the tax will be deducted on company contribution, interest on company contribution and interest on member contribution.”
My question – is employee’s contribution not taxable ? If yes, where should this empoyee’s contribution be shown in IT Returns (is it exempt under 10).
Thanks in advance for your reply.
Hi Viswa,
Indeed its a bit confusing and now even I feel confused, coz I’ve heard the same thing from some other ppl as well…where in cases only Employer contri was taxed and in some case the entire amt was taxed..I think even the PF ppl of individual trusts r confused. It wud b a gud option to contact directly those ppl at the time of withdrawal and get this clarified…
Regards,
gurpreet
Hi Gurpreet,
Recently I withdrew my RPF before completion of 5 years. The amount was a sum of employee contribution + employer contribution + voluntary contribution + the interest. TDS was deducted on the total amount. But when I received form 16 from my employer, only the employer contribution part of the withdrawn amount is shown as taxable income. The rest amount is shown as exempted under section 10. Can I claim refund while filing return? Thanks in advance for an answer.
Hi Sharma,
Your normal Salary income + Employer contr of PF withdrawan = Taxable salary income..
Now compute tax payable on this…..deduct TDS already dedcuted from tax payable…balance is net payable/refundable.
I hope this clarifies the query…if u need more explanation plz let me know
regards,
gurpreet
Hi Gurpreet,
Thanks for a prompt reply. Now it is clear to me. After computing the tax, there is a net amount refundable to me. As TDS was deducted on the total RPF amount, I have claimed refund while filing the return.
Also if only the Employer contribution part of the EPF is taxable, then why should they deduct TDS on the whole amount initially? Its making the whole thing complicated.
hi gurpreet,
i have a question for you.
last year i withdrawn the PF amount for my last employer before 5 years.
i got the pf amount but tds was deducted on that amount as it was withdrawn before 5 years.
the amount was ard 50000 thousand and tds deducted was around 1800.
now for my current employer i already paid all the taxes, but while filling the return 1) is this pf amount be added as income? 2) if yes then instead of paying 1800 as tds on pf amount it is showing that i have to paid more tax on total income, is it true or i m doing some wrong calculations?
Hi Rajinder,
Show the PF amount withdrawan (Gross) in your Salary income. Now compute Tax. Whatever tax u get reduce the TDS already deducted on PF / Salary income. Balance will be the tax payable/refundable.
Regards,
gurpreet
Rajinder,
plz see my reply below to Mr Sharma’s query as well
I hope ur doubt will be cleared
Regards,
gurpreet
One last query : In case i get it transferred to new company, Will i be aable to draw at anytime during the service in next company or at the time of resignation only?
Vikas,
for withdrawing PF during ur tenure it’ll b best if u consult ur HR on the same as they will b best to guide u
regards,
gurpreet
Hi Gurpreet, thax for the response.
Also is the 9.5% interest rate Simple or compunded in PF?>
I hope after 5 years , today it wont be taxable now?
Also in the next company the counter shall start from Zero , right?
Vikas,
PF rate is compounded….and yes in the next co the counter will start from 0 until u get it transferred…
regards,
gurpreet
Hi,
what is the rate of tax deducted on PF withdrawal.is it count-part of empolyee salary ? or there is another salb for that.
Hi Narendra,
There is no slab for PF taxation. Its slab depends upon the slab in which ur salary falls in. Since PF is 12% of salary calculation is made to determine wat was ur salary wen PF was deducted and accordingly tax is calculated when u withdraw PF. (i’m not 100% sure abt this answer, but I think this is the only logic in determining rate of tax)
Regards,
Gurpreet
Hey,
I have given resignation in the first company (joined in 2006) and hence completed 5 years on 14 July’11. I have following queries:
1. If i get it transferred to the next employer trust account, can i withdraw it anytime or it shall be withdrawn at the time of resignation only.
2. If i withdraw right now, will it be taxable?
In general what is better: To get transferred or to get withdraw.
Hi Vikas,
Its always better to get ur PF transferred, as by doing so u can accumulate money as well as avoid Tax…In ur case u can withdraw it as u’ve completed 5 yrs…
regards,
gurpreet
I server in follwing four companies and transfered the balance as follows:
1. From 2004 to 2005 I worked in Company A
2. From 2005 to 2006, I worked in Company B and did not transfer the PF from A to B
3. From 2006 to Apr 2010 I worked in Company C and transfered the PF of company A and B to company C
4. Currently I am working in Company D and did not transfer the PF balance from company C.
Question – if I withdraw the balance of all the accumulated PF from Company C that maintains the private recognised PF trus, will it attract income tax?
Regards,
Vikash Verma
hi Vikas,
ur case im bit confused…I think it’ll b taxable but let me confirm it from someone else too…so that I’m completely sure….can u pls drop me a mail @ gurpreet.gulati@gmail.com and I’ll revert to it at the earliest..
regards,
gurpreet
Hi All,
Lot of discussions on PF withdrawal on resignations before 5 year completion. Anybody can comment on withdrawal in case of termination of service by employer (due to closure of operations) before completion of 5 year service? I understand this is non-taxable as per PF exemption rules, but do we need to show this withdrawal in the annual IT return?
Regards
Satyashis
Hi Satyashis,
Its always gud to show any income which u’ve recd via Bank A/c (I assume that u’ve recd ur PF withdrawal in the same mode)
Thanks & Regards,
Gurpreet
Hi,
I have worked in organization A for about 2 years (June 2004 – April 2006) and then took a break of one month before joining organization B in June 2006. I got my PF transferred from ‘A’ to ‘B’. I left “B” in April 2011 for further studies and applied for full withdrawal of my PF. Is the withdrawal taxable? if yes what is the tax applicable on which contribution?
Hi Abhishek,
considering ur case, PF shouldn’t be taxable as in Co A u transferred ur PF and in Co B u worked for 5 yrs….So u can withdraw ur PF..Rate of TDS on PF withdrawal depends upon wat salary u were drawing.
Thanks & Regards,
Gurpreet
Hi Kamal,
PF will be taxable if withdrawan before serving 5 yrs of continuous service to the company. Rate of TDS will depend upon ur salary which ur drawing. You can use PF for any purpose but it will be taxable.
Regards,
Gurpreet