Tax on Provident Fund withdrawal

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This discussion clarifies the tax implications of Provident Fund (PF) withdrawals, specifically focusing on the 5-year continuous service rule. The consensus is that service with multiple employers can be combined to meet the 5-year threshold, thus avoiding Tax Deducted at Source (TDS) on the withdrawal from a previous employer's trust. It's confirmed that the 5-year period doesn't need to be with a single employer.

Vaibhav

Vaibhav (Querist)
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03 October 2020 Hello All,

Please consider my below Employment history and advise me about taxability on PF withdrawal.

Employer 1: May 2012- May 2014 (2 yr) - PF held at EPFO
Employer 2: June 2014 - Feb 2019 (4 yr 8 months) - PF held at Employer's trust
Employer 3: Feb 2019 - Present - PF held at EPFO

I now wish to withdraw my PF from Employer 2, which is held in their trust and not transferred by me. E1 PF was with EPFO (and its now transferred to E3 PF account at EPFO).

So can I ask Employer 2 to consider my service as 5+ continuous years, by including 2 years spent with E1. And hence E2 should not deduct TDS on my PF withdrawal. Is this understanding correct?

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 October 2020 TDS as employer 2 service is less than 5 years. Transfer the amount to EPFO no TDS applicable.

Vaibhav

Vaibhav (Querist)
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05 October 2020 But why can't we add my service with Employer 1 + Employer 2 and together consider it as 5 year continuous service? Does EPF rule say that 5 year service has to be with same employer?

Thanks.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 October 2020 Yes, you are right 5 years service can with more than one employer. No TDS applicable in your case.

Vaibhav

Vaibhav (Querist)
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06 October 2020 Thank you Seetharaman ji.

If anyone has a different view then pls drop a comment.

Thanks

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