Taxability of PF Withdrawal

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This query is : Resolved

GIRISH SHARMA (Querist)

15 July 2011 Dear Sir,

I have withdrawn my PF balance BEFORE 5 yrs of service & received in FY 2010-11 as under:-

My Contribution: 108602/-
Company Contribution: 52707/-
Interest: 25370/-

I had no other income as I did my further studies during FY 2010-11. Company deducted TDS 56446/-

Pls advise the tax treatment of EACH component as above.
Is tax payable on MY CONTRIBUTION? At what rate? Can I claim basic exemption from MY CONTRIBUTION?

I would be greatful for an early response.

Regards
G. Sharma

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

15 July 2011 The withdrawal from PF before 5 years:
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Think about a hungry man who wants to eat the dishes before him , but his hands are tied with his legs.
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Provisions:
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Your past income will be recalculated assuming that the PF was an unrecognised PF.
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In such a situation, the exemption claimed by you, on your contribution will be added back from the very first year of contribution and your tax liability will be recalculated for all the 3-4-5 years.
What will happen?
Let the things be remained as suspense for at least me. Or assign the work to a knowledgeable person unlike me after reading the reply thoroughly.

What You have to do:
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Just show the Company contribution and interest on it , as salary income. Balance Interest will be on your contribution- which is shown ..under Income from other sources. Upto here 78077/- has been adjusted.

Being an expert- my wrong but practical suggestion to you is to show " Your Contribution" also as Salary Income and pay tax upon it. The department may or may not notice the things. Just take a chance
at least once . You have enough tax credit also. Let them recompute if they desire to do so.

I do not know how the TDS of 56446/ has been computed by the company.
But even after showing all the above income you will receive a hefty refund which may be kept by you. As I do not assure you to pay any liability in case arises due to your past income data.
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So, the ball is in your court now, you have to choose whether tax (difference) has to be paid on the earlier year's income after re-computing the income or to go according to the wrong expert advise.

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