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?

facebookShare on Facebook
TwitterTweet
FollowFollow us
PinterestSave

No related posts.

327 thoughts on “Tax on Provident Fund Withdrawal”

  1. Hi,

    I worked in a company in Bangalore from Apr 05 to Sep 06 and then shifted abroad. I want to withdraw my PF now:
    1. Is the form 19 on the EPFO website the correct form to do the withdrawl?
    2. Is there a postal address where I can send the completed form?
    3. From my reading of Form 19 it looks like I do not need last employer’s attestation (since I have not worked in India for around 5 years now) – is that correct?

    Thanks in advance for your help

    Reply

  2. Dear sir,

    I worked in A company for 6.5 yrs. this company initially has company pf trust pf for 2 yrs, later moved accounts company pf trust to govt pf trust.
    A company (2yrs private trust)
    A company (4.5 yrs govt trust)
    I worked in only one company for 6.5 yrs. recently i shifted to some B company.
    And since my contribution to govt trust is for only 4.5 yrs,
    Am I taxable if withdrawl pf .

    please advise.

    regards
    kumar v

    Reply

  3. Hi Gurpreet,
    Seems you have well knowledge of PF withdrawls. And hats off for giving same answer of five year continuation of services to everyone for tax deduction.

    Well i also want to use your expertise regarding the same.

    I worked in company A for 3years 6 months. As per policy my PF will be deducted for tax. However, If the service is terminated on account of ill-health, will my pf still be deducted for tax?
    And please let me know the documentation needed to provide employer A or PF office.Or any extra formality i need to fulfill

    Reply

    1. Rule 8 of Part A of the Fourth Schedule of I T Act provides the circumstances under which the accumulated balance payable to an employee is exempt from tax. If employee fulfills any of following conditions, payment from recognised provident fund is tax free :

      (i) if he has rendered continuous service with his employer for a period of five years or more, or (ii) if, though he has not rendered such continuous service, the service has been terminated by reason of the employees ill-health, or by the contraction or discontinuance of the employers business or other cause beyond the control of the employee, or

      (iii) if, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognised PF maintained by such other employer

      Reply

  4. I am working for a company which has recognised PF trust. Total job tenure is 3years-11 months as on date. Overall my contribution + VPF + EMployer contribution is approx 3.6 lacs. I am now resigning and will do my own business. I do not need PF money as of now.
    When should I withdraw it so that It is not taxable. Kindly advise.

    – If i withdraw today- It is taxable for sure.
    – What If i withdraw after completion of 5 years, i.e somewhere after Feb’2013.

    Pls clarify.

    regards

    Reply

    1. Hi Neeraj,
      It won’t matter if u withdraw after Feb’13. There has to be continuous transfer for 5 years….in ur case the withdrawal will be taxable.

      Thanks & Regards,
      Gurpreet

      Reply

      1. @Gurpreet,

        A per EPS Scheme Details,

        The member can take either withdrawal benefit or can take scheme certificate so that the 10 years service can be added to any future service that you may put in, in any other covered establishment. By virtue of being a holder of a scheme certificate, if the member dies before 58 years, widow / widower and children shall be entitled for pension.

        Hence you can wither take withdrawl or receive pension after 58 years.

        Reply

  6. Hi Gurupreet,

    My working period is as follows.
    Comapny A: 11th July 2005 to 24th November 2006.
    Comapany B: 1st December 2006 to 20th December 2008
    Company C: 28th december 2008 to till date
    Gaps between two companies= 6+8= 14 days.
    As per my understanding my total service period from 11th July 2005 to till date is 6 years 5 months 14 days. But for PF purpose will those 14 days(break ) will be deducted ?
    Plz reply me then I will proceed with withdraw or transfer my PF accounts accordingly.

    Thanks
    Manas
    manas_2k3@yahoo.co.in

    Reply

    1. Hi Manas,
      The break period will be excluded, but in ur case u’ve well over 5yrs of continuous transfer…so it will not be taxable…u can go ahead with the withdrawal facilities..

      Thanks & Regards,
      Gurpreet

      Reply

  7. Dear Gurpreet,

    I was looking for an answer related to PF & I think I got answer to my questions. However, would like to get it clarify from you before proceeding with PF withdrawal. Here is my question:
    1. Worked in Company ‘A’ from 2003-2006 (31 months)
    2. Worked in Company ‘B’ from 2006-2007 (13 months)
    3. Worked in Company ‘C’ from 2007-2011 (50 months)
    During this period, I was at onsite for about 27 months. I always transferred my PF accounts during the shift. Now I have left Company ‘C’ & planning to withdraw the PF. Kindly let me know whether my PF withdrawal will be taxable! I have not completed 5 years of continuous service in any company, however always transferred the PF account to new PF account created by the new employer. Appreciate your quick response on this.

    Thanks,
    Guru

    Reply

    1. Hi Guru,
      The rule says that for 5 yrs there shouldn’t be any withdrawal, u may have multiple PF’s but since u’ve kept on transferring it….it won’t be taxable.

      Thanks & Regards,
      Gurpreet

      Reply

  8. Hi,

    I have submitted form 13 to my current employer for PF transfer. My previous employer says they have submitted the check for my EPF , but for EPS they dont have any control on them. I have checked with RPFC and as per the they have not yet received any document for EPS transfer. Please confirm if I can go ahead submit form 10C to withdraw my EPS , even though EPF will get transferred to my new a/c. Please also confirm that for will the EPS is taxable for less that 5 yrs or employment.

    Reply

    1. Hi Pooja,

      In one of my earlier comments/reply I mentioned that I’m not well versed with EPS rules, hence I won’t be able to suggest anything regarding that.,,,my apologies for that…

      Thanks & Regards,
      Gurpreet

      Reply

  9. I have completed 5 yrs in current organization and working now aslo, is it possible to withdraw my PF after 5 yrs by continuing with same employee

    Reply

  10. hi gurpreet,

    i have worked in a bank ,from june 2010 to october 2010..the bank deducted my pf every month,but now they are saying that as you have not completed 6 months and u were not confirmed so u will not be able to claim pf and moreover they maintain their pvt. pf a/c..
    is there any way 2 claim pf….they are not ready to give me the claim..plzz help

    my second question is …now i m working in company from march 2011…and i m about to leave that job in jan 2012…will i ll b able to claim my pf bcoz one of my friend told me that if u leave the job bfore 1 yr employer will not b liable to contribute,,,,is that true….

    Reply

    1. Hi Tannu,
      As regards ur first instance with Bank, I think that you won’t be able to claim ur PF….since the employer has the authority to say that you were not confirmed..Although this is not written in law, but this is a practice which most of the companies follow..
      Secondly, u can withdraw ur PF, and employer is liable to contribute….and u should be able to get employer portion also, when u withdraw ur PF

      Thanks & Regards,
      Gurpreet

      Reply

  11. I worked in the company for 2.5 yrs which had a separate PF trust. Then moved to another company which maintains the EPF. Is there any time frame within which my PF from Previous company has to be withdrawn or transferred?

    Reply

    1. Hi Bhargavi,
      Yes, u should transfer/withdraw ur PF within 3 years, after that u won’t b getting any intt also those a/cs will b freezed by Govt also.

      Thanks & Regards,
      Gurpreet

      Reply

  12. Dear Gurpreet Ji,
    My job period in compnany for 12years and i have withdraw pf (Empoyee Share )
    can i withdraw employer share which is in Pension Fund i do not want pension so how can i withdraw?

    Thanks & regards

    Uma shankar sharma

    Reply

    1. Hi Uma Shankar,
      I don’ t think that you can withdraw only Employer share…the entire amount i.e. employee+employer share will be withdrawn…u can contact ur HR deptt for the relevant formalities of withdrawal..

      Thanks & Regards,
      Gurpreet

      Reply

  13. Dear Gurpreet Ji,
    I am not still clear that how much tax will be deducted on my PF amount!
    I am again mentioning my details:
    My total EPF amount is : Rs 75,000 (with interest) (maintained in company PF trust)
    My total Pension amount (EPS) is : Rs 30,000 (approx)
    My last drwan slaray was : Rs 11500 (gross) / Rs 10445 (in hand)
    Total working : 4 yrs 10 mths

    Reply

    1. Hi Kumar,
      Adding Rs.105000 to ur last annual salary i.e (11500*12 = 1380000 + 105000 = 243000). ur total income becomes Rs243000, So I taxed it at 10% (243000 – 180000 = 53000 *10%= 5300) After adding cess it will be around 5500….However, even I’m not sure that this is the correct way…you’ll hv to wait until u receive the stmt from PF office of ur withdrawal..that will clarify things

      Thanks & Regards,
      Gurpreet

      Reply

  14. Dear Gurpreet,

    My queastion was..
    Will any amount be added towards my EPS amount from the side of Govt of India.

    One more question is..
    My last drawn salary and PF maount(with Inerest) is Approx. 82000/-
    Will any tax be deducted on the same.

    Reply

  15. Hi Gurpreet,

    I worked in a company in Mumbai for 4 yrs. Then I got transferred abroad in the same company, but as an expat earning salary in USD. Therefore my ‘full and final’ settlement was done with my company’s Indian entity, and all EPF contribution was stopped as I am now deemed to be an NRI.
    Please advise if my EPF withdrawal in this case will be taxable or not? If taxable, will the tax be on: (employer contribution+interest+my contribution exempted under 80C)?

    Reply

    1. Hi Aaftaab,
      In ur case the PF withdrawal will be taxable. The entire portion (employer contribution + employee contribution + interest) will be taxable.
      Thanks & Regards,
      Gurpreet

      Reply

  16. Dear Gurpreet,
    As you know very well that there are 2 parts of PF amount.
    1. EPF amount
    2. EPS amount
    As per PF statement my EPF amount is approx. Rs 70,000/-(with interest) and EPS amount is approx. Rs 30,000/-
    My EPF amount will be settled by Company’s PF trust.
    My total tenure in the resigned company is 4 yrs and 10 months.
    My salary was neverTaxable in the entired period of tenure in the company.
    Last Gross was Rs 11,500/-

    Now, I have 2 questions:
    1. About Tax on my EPF/EPS amount.
    2. Does any amount be added in my EPF/EPS amount from the Central Govt from its own coffers.

    Reply

    1. Hi Kumar,
      Even I’m not 100% sure that what % is considered for tax deduction. However I believe that your last drawn salary should be considered. So adding up ur last drawn salary with that co and the PF amount, whatever the total amount is and in which Tax slab it falls, tax will be deducted.
      I’m not able to understand ur 2nd ques, can u pls re-phrase it.

      Thanks & Regards,
      Gurpreet

      Reply

  17. Hello Gurpreet,

    I worked for Company ‘A’ from Aug 2006 till Feb 2010(43 months), Then i joined a company ‘B’ Mar 2010 till Sep 2011(19 month).
    I got transferred PF amount from comp A (Govt Pune PF Office) to Comp B PF a/c (Govt Mumbai PF Office). Now i joined Company ‘C’ from Sep 2011….
    Please let me know, If I withdraw the amount from comp B, would it be taxable?

    Reply

  18. Hi Gurpreet,

    A the end of Jan 2012 Iwould have compleneted 5 years of continuous service with 3 employers. In between I took breaks of 15 days and one week before joining each new employer. Will these be counted as ‘breaks’ ?.. … am planning to quit soon however I want to ensure my last day covers the 5 year period.
    Employer 1 – 3.6 years (Jan 29 2007)
    15 day break
    Employer 2- 9 months
    1 week Break
    Employer 3 – 7 months – (till date)
    – Can my last day be Jan end or so I need extra days of service Till mid Feb to ensure that the ‘net’ period is 5 years?
    – Transferring Emp 1 to 3

    – Employer no 2 PF has still not been transferred (as I cannot fill te form for the transfer as am expecting another transfer into that account)

    – Does all the PF need to be transferred int one account to be considred ‘continuous service’? Employer will not transfer the same after I resign… Can PF be transferred/ consolidated after resignation?

    Will be really helpful as I am confused about whether to resign now or wait a few more months.

    Reply

    1. Hi Maria,
      the breaks b/w employements will not be counted. so u need to work some extra days to complete 5 years. however, leave taken during employement are considered a part of employment. Also, you’ll need to transfer all ur PF to one PF and then withdraw it. In that case it will not be taxable.
      Thanks & Regards,
      Gurpreet

      Reply

  19. Hi,

    I worked as following

    Company A from Jul 2006 to Jul 2010
    Company B from Sep 2010 to June 2011
    Company C from Sep 2011 to Till date

    I filled the form to transfer PF from A to B & it recently got trasferred successfully. Now I if I withdraw PF from B then would there be any tax on it ? PF account of company A is more than 5 years old

    Appreciate your response.

    Atul

    Reply

      2. I want to be very careful before filling withdraw form for company B.

        Although I did not receive any official communication/receipt from PF office that amount is transferred from A to B. However if I check EPF site for claim status it gives following message.

        “Claim Form 13 for Transfer to New Account Number: AGAINST Old Member Account No (xxxxxxxxxxxxxxx) has been approved. Payment is under process.”

        For the same account if I check the balance then it gives message “Your account has been settled”

        Shall I consider amount is transferred to B & fill the withdrawal form?

        Appreciate your response.

        Atul

        Reply

  20. The EPF website was updated with the PF account details till 31-mar-2010, u can able to view only the PF account opened before Mar 2010.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *