Epf withdrawal & taxation

Rule 8. The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be excluded from the computation of his total income—

 (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 employee's ill-health, or by the contraction or discontinuance of the employer's 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 provident fund maintained by such other employer.

Explanation.—Where the accumulated balance due and becoming payable to an employee participating in a recognised provident fund maintained by his employer includes any amount transferred from his individual account in any other recognised provident fund or funds maintained by his former employer or employers, then, in computing the period of continuous service for the purposes of clause (i) or clause (ii) the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall be included.

 Am i fulfilling the 5 year norms? 

You have rendered continuous service of 5 years , hence withdrwal in relation to A,C,E should not attract Tax deduction.

So since I have left E, will the transfer from D to E still happen or it will be cancelled? 

 

Transfer should not be cancelled if the account has not been closed, but I can not say this with 100% surety.

Thank you very much for your response..........nice to learn that no TDS will be deducted.

Just a final query; 

Will I have to pay tax on EPF withdrawal when I file the annual IT return next year??

Thanks & Regards,

Shardul Jani.

Thank you very much for your response..........nice to learn that no TDS will be deducted.

Just a final query; 

Will I have to pay tax on EPF withdrawal when I file the annual IT return next year? I mean to say is it actually taxable as income?

Thanks & Regards,

Shardul Jani.

Once you have rendered continuous service of 5 years, you may withdraw your EPF at any time without tax deduction. Since it is not taxable at all. If withdrawl is in case other than those covered under rule 8, then such withdrawl is treated as an income. [Rule 9]

If organization discontinues its operation then such a situation is also covered under rule 8(ii), hence withdrawl shall not be taxable

Regarding pension , kindly go through the following provision

S.10(10A) (i)

(basically for govt. emploees)any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or a corporation established by a Central, State or Provincial Act ;

(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed—

 (a)  in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and

 (b)  in any other case, the commuted value of one-half of such pension,

such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;

(iii) any payment in commutation of pension received from a fund under clause (23AAB) ;