PF withdrawal

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 December 2010 Dear All,

I need one clarification, I have worked for one organisation for around 4 years & 1 month. My PF was deducted regularly during the period. Recently I have joined another organisation where PF is not applicable. I want to know if I withdraw the PF at this stage will it be taxable and if I withdraw it after 5 years from the start of PF account what are the rules of withdrawal & how much will be the tax if any.

Further the deduction were getting divided into two parts EPF & EPS(Rs.541/- per month) what are these exactly & will I get both of them or not.

Thanks & Regards

CA. R. B. SAH

CA. R. B. SAH (Expert)
Follow

15 December 2010 withdrawl of pf in your case is not taxable.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

17 December 2010 Thanks,

But I understand that PF withdrawal before 5 years is taxable. Pl guide.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
Follow

10 August 2024 When it comes to withdrawing your Provident Fund (PF), there are specific rules regarding taxation and eligibility, depending on the duration of your PF account and the nature of the contribution. Here's a detailed explanation:

### **1. Tax Implications on PF Withdrawal**

**a. **Withdrawal Before 5 Years of Continuous Service:**

- **Taxability**: If you withdraw your PF balance before completing 5 years of continuous service, the amount is subject to taxation.
- **Tax on EPF (Employees' Provident Fund)**: The EPF portion will be taxed as per the applicable tax slab rates, and it may also attract a Tax Deducted at Source (TDS) if the amount exceeds ₹50,000.
- **Tax on EPS (Employees' Pension Scheme)**: The EPS amount is generally taxable as well, but it's calculated based on a pensionable amount, not the total contribution.

**b. **Withdrawal After 5 Years of Continuous Service:**

- **Tax Exemption**: If you withdraw the PF balance after 5 years of continuous service, the amount (both EPF and EPS) is exempt from income tax under Section 10(12) of the Income Tax Act.
- **Continuous Service**: The 5-year period must be continuous, which means your service period should not have any break.

### **2. Components of PF**

**a. **EPF (Employees' Provident Fund)**:

- **Definition**: EPF is a savings scheme where both the employee and employer contribute a certain percentage of the employee's salary.
- **Withdrawal**: On withdrawal, the accumulated amount in the EPF account, including interest, will be refunded.

**b. **EPS (Employees' Pension Scheme)**:

- **Definition**: EPS is a pension scheme that is part of the EPF. The employer contributes a portion of the EPF contribution to the EPS.
- **Contribution**: ₹541 per month, as mentioned, is the EPS contribution.
- **Withdrawal/Transfer**: EPS contributions are generally not available for lump sum withdrawal. Instead, they are meant for pension benefits. If you have less than 10 years of service, you may get a pension withdrawal benefit, which is calculated based on your service duration and the pensionable salary.

### **3. Steps for PF Withdrawal**

1. **Check Eligibility**: Ensure you are eligible for withdrawal based on your service duration.
2. **Online Application**: You can apply for PF withdrawal online through the EPFO member portal if your Universal Account Number (UAN) is activated and linked to your Aadhaar.
3. **Offline Application**: If you prefer or if online facilities are unavailable, you can submit the PF withdrawal form to your regional EPF office.
4. **Documents Required**: Typically, you will need to provide KYC details such as Aadhaar, PAN, and bank account details.

### **4. Process for EPS**

- **Pension Withdrawal**: If you are eligible for pension under EPS, you will need to apply for a pension scheme, and the pension amount will be based on your service duration and contributions.
- **Transfer**: If you join a new organization where PF is applicable, you can transfer the EPS balance to the new PF account.

### **Summary**

- **Tax**: If withdrawn before 5 years of continuous service, the PF amount (both EPF and EPS) is taxable. After 5 years, it is tax-free.
- **EPF vs. EPS**: EPF can be withdrawn or transferred, while EPS is typically meant for pension benefits and is subject to specific rules regarding withdrawal and pension benefits.

For precise calculations and guidance, especially if you have unique circumstances, consulting a tax advisor or financial expert is advisable.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now