After being employeed for 2.5 years I quit my job without taking any other formal employment. But I did not touch my EPF account. Now at the end of a total 5 years if I withdraw my amount will it be taxed.
Novice Tax Expert (Business Professional) (60 Points)
04 October 2011
After being employeed for 2.5 years I quit my job without taking any other formal employment. But I did not touch my EPF account. Now at the end of a total 5 years if I withdraw my amount will it be taxed.
Devendra
(Chartered Accountant)
(4775 Points)
Replied 04 October 2011
The PF withdrawn shall be taxable in your hands. You are not in employment for continuous 5 years. Hence PF shall be taxable.
Regards,
Devendra
Jayesh
(Internal Auditor)
(214 Points)
Replied 04 October 2011
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 above conditions(i.e. continuous employment of 5 years), then the amount lying to your credit in the PF account is taxable. The taxability would be as follows:
Your contribution to PF: Not taxable
Interest on your PF contribution: Taxable under the head 'Income from Other Sources'.
Employer's contribution and interest thereon: Taxable under the head 'Salaries'.
Though TDS may be deducted from the amount being disbursed to you, it would be advisable to do your own working and determine the actual tax.
U S Sharma
(glidor@gmail.com)
(21056 Points)
Replied 04 October 2011
| Originally posted by : Novice Tax Expert | ||
 |
After being employeed for 2.5 years I quit my job without taking any other formal employment. But I did not touch my EPF account. Now at the end of a total 5 years if I withdraw my amount will it be taxed. |
 |
I m afraid to say that your PF account may got dormant, for non contribution.
visit your PF office and make it operative 1st, then think of claims,
claims are taxable as the service tennure has not completed 5 years.
Novice Tax Expert
(Business Professional)
(60 Points)
Replied 13 October 2011
Dear Friends,
In effect you are saying that even a person who is not capable of earning continuously for 5 years is liable to get taxed whereas a person who can earn continuously for 5 years is rewarded by not taxing his PF. Isn't it counterlogical? What if my case is that I was fired after 2.5 years and and after that I was not able to take up employment in the organized sector in spite of my best efforts? Can somebody help me with the specific section of the income tax act where I can read this and clarify.
Thanks
Novice Tax Expert
(Business Professional)
(60 Points)
Replied 13 October 2011
Continuing on my previous query, what if because of some disaster my company collapsed in 2.5 years and finding the next job took me 1 month's time during which there was no contribution into my PF account. Am i going to be taxed because i dont fulfil 5 years of continuous service. I am totally bewildered.
Roshan Thomas
(C.E.O )
(356 Points)
Replied 13 October 2011
Rule 8 of Part A of the Fourth Schedule of I T Act provides the circumstances under which the accumulated balance payable to an employee is exempt from tax. If employee fulfills any of following condi
tions, payment from recognised provident fund is tax free :
(i) if he has rendered continuous service with his employer for a period of five years or more, or
(ii) if, though he has not rendered such continuous service, the service has been terminated by reason of the employees ill-health, or by the contraction or discontinuance of the employers business or other cause beyond the control of the employee, or
(iii) if, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognised PF maintained by such other employer.
However please note that time limit is not mentioned for obtaining employment with any other employment, in the absence of such qualification, time limit may be taken as any reasonable lenght of time
GST Live Certification Course (39th Batch) - April 2024 (Weekend Batch) (With Certificate)
"Live class on Python for Financial Analysis: Unlocking Efficiency in Accounting and Finance"
CAclubindia
