Special Case Tax On PF Query

Tax queries 1664 views 3 replies

Prateek

A.M

25 Points Joined February 2010

Hi. Thanks for reading & answering my query.

I am working in a consulting & advisory MNC. For PF puposes for PF cut my company cuts 12% share and also their share of 12% from me. Meaning I pay for my Company's 12% share too!! I cannot complain here as the the my employment offer clearly stated that my package included employers contribution of 12% towards PF too.

So my query is the following:-

I plan to go for higher studies in next Fy so will have to withdraw my PF. I would not be completing 5 years of service with this company and is the first time Iam getting my PF deducted.so what I want to know is that will whole amt. be taxable or only the interest. As EMPLOYER'S share I'am contributing will that be taxable too.
Secondly is it necessary to contribute towards PF. I mean my Basic Salary is above the limits specified by the PF ACT but my company says it is cumpulsory due to some internal policy. Can't I talk to them without creating any much hassel....actually I feel deducting PF is not good currently for me. I usually invest Rs 1 Lakh in ELSS to gain Tax EXemption. With PF I will need to withdraw and the amt will I think become taxable.....if I withdraw next year....as I need the funds for my MBA.
Also how much tax is deducted...meaning will I get PF amt. credited in the bank a/c after deducting tax or I will have todeposit it. Also if it is TDS then what is the rate...is it 22.5% or 30% or any other rate.
Also Suppose Even if I withdraw the PF Amt Next Year and they (designated autorities) cut tax on it but if my whole year income less than the taxable limit will I get the taxed amount back
Also If I leave my PF account as it is after leaving my job...I mean I do not withdraw the PF amt.....and suppose after my MBA I get a good job abroad and leave my PF a/c for 5 years (total) untouched then if I withdraw the amt will it be taxable.

I know it is rather long query but I will be gratefull if somnebody replies as my 12% share and employers 12% share (which Iam contributing) works towards around 1 Lakh.

I THANK you all in advance for all your help & Efforts!!

Thanks again!!

Replies (3)

Amir

Learner

4016 Points Joined December 2009

Dear Prateek,

U r rite in saying that ur package includes the Employer's share of PF contribution that's because ur appointment letter have shown what would be the "cost to company" to hire u, but that doesn't mean that u r depositing it on ur employer's behalf.

I hope, now u got d distinction between "salary" & "cost to company"

1) Employer contribution & interest on the same will be taxable

2) If ur salary is in excess of the limits then it is not mandatory to contribute towards PF till the time u complete 10 years of ur service. But in ur case Management policy matters, u can discuss the issue with them but u cannot force them..beacuse it is written in ur appointment letter as u have mentioned

3) U will get the amount of PF after the deduction of TDS (i:e Net Amount), Further rate will depend upon ur slab.

4) Yes, if ur total income of that year is less then the exemption limit, then tax deducted on PF amount can be claimed as refund

5) Brother, on one hand u r saying that u need money for education & on other u r ready to leave that money for five years...I m not sure on this but I don't think any such option is there.

Prateek

A.M

25 Points Joined February 2010

Amir Bhai,

Thanks a ton......

Really Reaaly Apreciate your reply...very helpful....

Brother can you answer the last question too...i.e leaving the money dormant for 5 years...

Again...Thanks in Advance!!

Good Luck In Your Career!!

Amir

Learner

4016 Points Joined December 2009

Dear Prateek,

Look this is what I could get from 1 of the website, but I don't think the taxability will be affected i:e the amount will still be taxable beacuse - taxability depends upon "sum payable" & not "actually paid"

Withdrawal from the fund – Withdrawals are usually made at the time of retirement or otherwise. Member is entitled to withdraw full amount in the following cases:

On retirement from service.
On retirement on account of permanent and total incapacity for work due to bodily or mental infirmity.
Immediately before migration from India for permanent settlement abroad or for taking employment abroad.
On termination of service in the case of mass or individual retrenchment.
On termination of service under a voluntary scheme of retirement.
After two months of resignation. In case of no employment.

Note: A member of the Fund shall continue to be a member until he withdraws under aforesaid conditions.