Taxability of PF withdrawal

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Rachit (Querist)
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29 March 2010 If an employee withdraws PF within 5 years of his service, Is PF so withdrawn taxable??? If yes, What portion is taxable? and at What rate?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 March 2010 1. If it is a statutory providend fund, the entire amount is exempt from tax under section 10(11) of the Income tax Act,1961.
2. If it is a recognised providend fund,the amount received is taxable since the employee had not rendered continuous service of five years.
3. If it an unrecognised providend fund, the accumulated balance of employers contribution along with interest accrued on that part of contribution is taxable as profit in lieu of salary. Interest on employee's contribution is taxable under the head"income from other sources' as per supreme court decision in the case of CIT Vs Hyatt (1971) 80 ITR 177.

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Rachit

Rachit (Querist)
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30 March 2010 Sir,

Based on your above reply, I would like to know that in case of a Recognised PF, since the entire amount received is taxable, it would imply to both employers as well as employees contribution alongwith interest. Is it so?

Padmaja CA

Padmaja CA (Expert)
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31 March 2010 Yes

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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31 March 2010 yes taxable

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