Tax on pf withdrawal

TDS / TCS 637 views 6 replies

sjayaraman

housewife

27 Points Posted on 22 August 2019

I have been a member of PF since May 2005. Please find my service history below -
May 2005 to July 2009 -- company A
Mar 2010 to Nov 2011 -- company B
Jun 2013 to Oct 2015 -- company C(PF balance from A and B were transferred)
Oct 2015 to Jan 2018 -- company D(PF balance from C was transferred)

As seen, my overall service during which I had contributed to PF is more than 10 years. I withdrew the money in May 2018 and TDS has been deducted. Wondering why. Can someone please clarify. Is it because of the breaks in my service?

Replies (6)

Kapadia Pravin

17264 Points Posted on 22 August 2019

Under which section TDS is deducted by Company D ?
Tax is there on PF withdrawal if you leave job within 5 yrs. Please go through again the working provided by Employer and basis on which TDS is deducted.

sjayaraman

housewife

27 Points Posted on 23 August 2019

Tax was not deducted by company D. I quit my job in Jan 2018 and then withdrew the entire PF money in May 2018.

My question is about why my complete tenure that started in May 2005 not considered for the '5 year' clause? Even if I consider only the duration of my total employment, its easily more than 10 years...

sjayaraman

housewife

27 Points Posted on 23 August 2019

Tax was not deducted by company D. I quit my job in Jan 2018 and then withdrew the entire PF money in May 2018.

debora M

BUSINESS DEVELOPMENT MANAGER

1697 Points Posted on 23 August 2019

The EPFO has amended rules to allow subscribers withdraw up to 75% of the accumulated EPF corpus after one month of quitting a job. The subscriber can withdraw the remaining 25% after unemployment for more than two months

Income tax on PF withdrawal:

1) EPF withdrawal is taxable if an employee does not render continuous services for a period of at least five years.

2) In case of a job switch, if EPF is transferred to another employer, the new employer’s period of employment is also included to calculate the continuous period.

3) If the total period of service is less than five years, accumulated EPF balance withdrawn becomes taxable in the financial year of withdrawal.

4) It is to be noted that there are four parts to any EPF contribution— employee’s contribution, employer contribution and interest earned from both employer’s contribution and employee’s contribution.

5) In case the period of continuous service is less than five years, the sum total of the employer’s contribution to EPF and interest earned on it is taxable under the head “salary" in the subscriber’s income tax return.

6) The subscriber’s own contribution portion of the withdrawal is not taxable. But if the subscriber had claimed deduction under Section 80C on his contribution in earlier years, it becomes taxable under salary. It is to be noted that the EPFO subscriber’s own contribution towards EPF is eligible for deduction under Section 80C of the Income Tax Act.

7) The interest earned on the subscriber’s own contribution portion is taxed under ‘income from other sources’.

8) On withdrawal before five years of continuous service, TDS @ 10% is levied.

9) But in a few cases, such as if amount is less than ₹ 50,000 or employer closing down the business, TDS is not levied.

sjayaraman

housewife

27 Points Posted on 26 August 2019

Thanks for trying to help, but, I am still not clear about answer to my earlier query...

"My question is about why my complete tenure that started in May 2005 not considered for the '5 year' clause? Even if I consider only the duration of my total employment, its easily more than 10 years..."

Can someone give a definite answer? Thanks!