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Pf withdrawal before 5 years

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pradeep

STUDENT

21 Points Posted on 14 December 2017

Hi Guys,

I have a friend of mine working in a state owned finance corporation and got good oppurtunity in a bank.

He has joined the corporation on 20.02.2013 and kept his resignation on 24.11.2017 and provided 3 months notice period for 3 months and stated his relieving date as 23.02.2018, which will complete 5 years. He wants to withdraw total pf amount for his sibling marriage. But, the employer accepted his resignation and stated that his service will be terminated by 31.12.2017 only.

My query is

As he supposed to work for 5 years and the employer requested to relieve before 5 years, which is not in control of the employee, Can we withdraw the amount without tax.

In need of urgent reply.

Thanks,

Pradeep

Replies (1)

Prajjwal Kaushik

Finance Professional

6216 Points Posted on 14 December 2017

I understand that the PF maintained by your former employer was a recognized PF.

As per the provisions in the Income-tax Act, if the employee has rendered continuous service for five years or more, then the withdrawal of accumulated balance from such PF is not taxable at the time of termination.

Since the period of your services with the employer is less than five years, you shall be liable to tax on the amount withdrawn from your PF.

In addition to the normal tax payable by you, you will be required to pay all the tax concessions availed by you so far on account of contribution to such recognized PF.

Further, the total employer’s contribution plus interest thereon, which was not taxed earlier, shall be taxable as profits in lieu of salary.

However, in case you take up another employment and if the accumulated balance in your PF account is transferred to your recognized PF account maintained by the new employer, no tax liability shall arise due to such transfer.