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tax deducted on PF withdrawal

Supraja (SE) (37 Points)

13 December 2010

Hi
I worked for one company for 3yrs 10months.
After that i didn't work for any company for 1 1/2 yr.
Then i applied for PF withdrawal thinking that 5yrs completed after account created and there wont be any tax on that. But they deducted 30% tax and paid remaining amount.

Please help me to get that amount anyway like filing ITR or etc.

Regards,
Supraja

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3 Replies

Paresh Rathod (CA) (222 Points)
Replied 13 December 2010

Case-I
If the continuous Service for more than 5 Years: TDS should be NIL

Case-II
If the continuous Service for less than 5 Years, all contribution made should be treated as made to the unrecognized PF & thus taxability is as follows:
a) Employee's Own Contribution, is exempt from tax but deduction u/s 80C/80L taken earlier should be disallowed, thus need to take effect of the benefit taken earlier & declare income accordingly.
b) Interest on Employee Contribution: Taxable under the head Income from other Sources.
c) Employer Contribution & Interest thereon: Taxable under the head "Salaries".

Mahesh (na) (29 Points)
Replied 13 December 2010

Dear Paresh,

I need one clarification, I have worked for one organisation for around 4 years & 1 month. My PF was deducted regularly during the period. Recently I have joined another organisation where PF is not applicable. I want to know if I withdraw the PF at this stage will it be taxable and if I withdraw it after 5 years from the start of PF account what are the rules of withdrawal & how much will be the tax if any.

Further the deduction were getting divided into two parts EPF & EPS(Rs.541/- per month) what are these exactly & will I get both of them or not.

Thanks & Regards,

Mahesh

Paresh Rathod (CA) (222 Points)
Replied 15 December 2010

The five year period is considered from the perspective of five years of continuous employment. If you left the employment before completion of five years but joined a new employer and got your existing PF amount transferred to the new employer, then the tenure with the new employer is also counted for the five years of continuous employment.

If you are not satisfying any of the above conditions, then the amount lying to your credit in the PF account is taxable.