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Tax on PF withdrawal

Rennie Alex Joseph (Retired) (21 Points)

28 October 2019

Hello - I am planning to fully withdraw my PF balance as I have migrated overseas permanently. I was an employee in an MNC in Bangalore for 11 years before moving abroad. My last working day in India was July 31st and so I have not been contributing to my PF account for close to 3 months now.

My query is if TDS would be applied if I fully withdraw my PF balance? Full PF balance is just over 25 lakhs. Will it be tax free or if any tax would be applied?

I have UAN and the account is linked to my PAN and Aadhaar. Please let me know if I need to furnish any more details here.

Thanks in advance for all the help,

Rennie

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3 Replies

Kartik Jain (student) (224 Points)
Replied 29 October 2019

PF receipts are exempt from tax, if the same are received from a recognized PF after rendering continuous service of not less than 5 years.

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Rijo John (audit manager) (447 Points)
Replied 29 October 2019

Any payment from a provident fund to which the Provident Funds Act, 1925 [19 of 1925], applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette;

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 06 November 2019

If you withdraw from EPF before completing 5 years of continuous service, TDS will be deducted. In calculating 5 years of service, your tenure with the previous employer is also included. If you transfer your EPF balance from the old employer to a new employer and your total employment is 5 years or more, no TDS is deducted. Do remember that you must calculate the exact 5 years, there is no grace if you are short by a few days.

Say you have been hired for a temporary position or you are on contract for a certain period. During this period you are not on permanent rolls and the employer is not liable to contribute towards your EPF. After some time, you are brought on rolls and the employer begins your EPF contribution. You resign after completing 5 years. However, this period includes the months when you were not on permanent rolls and therefore the employer will deduct TDS from your EPF withdrawal since 5 years are not complete.

A fund which is not approved by Commissioner of Income Tax, is considered an unrecognised provident fund. It may have been recognised by commissioner of provident fund or any other formal authority. But for a fund to enjoy income tax benefits of a recognised provided fund (where withdrawals are exempt after 5 years) it must be approved by a commissioner of income tax. If you are a member of URPF, your withdrawals are taxed, whether or not you have completed 5 years of service. Our tip: It helps to check with your employer about the status of your EPF.