Tax on epf interest

Dear Sanjay,

Nothing is taxable subject to following conditions

1. Employee left the job after five years of service OR

2. Where Period of service less than 5 years, the termination is due to ill health, discontinuance of business of employer. OR

3. Here on re-employment, the balance in R.P.F is transferred to R.P.F with new employer.[For the purpose of computing 5 years period, Period of services rendered with previous employer shall also be included.]

In your case I would say your employer is being harsh on you. He is deducting TDS on no grounds. Neither you left service before expiry of 5 years of service nor you have withdrwan more than 50,000 before completion of 5 years of service. Because these are the only two cases where you employer can deduct TDS. It is absolutely not legal to deduct TDS. Even I doubt that is he realy deducting TDS, I would like to suggest you to check form 26AS.

Regards

Dear Sanjay Singh
Your employer has deducted TDS
TDS is deductible if taxable premature withdrawal is Rs. 30,000 or more

I agree with Shreesh ,

Check your form 26AS and file your income tax return to get refund.

Hi Dinesh,

Thanks for your reply and support.

But only form 26AS I came to know about TDS of PF amount. After consluting with them they are saying 

"Under Section 10 (12) of the Income Tax Act, the ‘accumulated balance’ due and becoming payable to an employee participating in a recognized provident fund during the tenure of his service, do not form part of total income. 
The expression ‘accumulated balance’ is defined under Section 2 (f) of the Fourth Schedule – Part A, to mean the balance to the credit of an employee on the date he ceases to be an employee of the employer maintaining the fund. Thus the accumulated balance, is the sum of the amount of provident fund credited to the account of the employee during the tenure of the employment of a member. 
The interest credited to the accumulated balance of an employee who has resigned or retired from his services, does not fall within the exceptions provided in Section 10 (12) or Section 8 of Part A of the Fourth Schedule, and is therefore to be treated as income liable to be taxed. The Company / Trust is therefore under the obligation to deduct tax at source from such interest under Section 194A of the Income Tax Act. " 

On going through the rules. I found that any interest after service discountinuation will be treated as contribution to unreconized PF. but it is not clear under which section (80C, or exempted income on PF interest) I can claim this in IT return.