Taxability of epf withdrawal before 5 years.

Tax queries 725 views 3 replies

rahul

none

91 Points Joined January 2013

Hi,

Please can anyone help me with the taxation of the withdrawal of EPF (100%) before completion of 5 years. I am not sure about the amounts and under which Income heads the amounts would be taxable.

Take the following figures as an example: (These were the amounts received)

1) Employee's Contribution - 100 (Was fully claimed under 80C)

2) Employer's Contribution - 80

3) Pension Contribution - 20

4) Interest on Employee's contribution - 15

5) Interest on Employer's contribution - 10

As far as I have understood, employer's contribution (Rs. 80 + 20) and interest there on (RS.10) should be taxable under the head Salary as it was not taxable during the years in which the contribution was made. Also interest on Employee's contribution (Rs. 15) should be taxed as other sources.

Please confirm whether the above treatment is correct and guide about the taxability of the employee contribtion (Rs 100) which was earlier claimed under 80C in the year of contribution.

Thanks

Rahul

Replies (3)

Harshit Kabra (INVESTOR)

Student CA final

1113 Points Joined June 2016

hllo mr rahul

here i will help u

see, In case you are a member of recognized provident fund it depends on if contribution is over 5 years or not, including transfers from different companies. If you withdraw before completing a period of 5 years, then all your previous years income gets recomputed as if the fund was unrecognized from the very beginning (i.e., the tax benefits you received on your own contribution u/s 80C/88 in earlier years will get forfeited) and further the employer contribution and interest received will be added to your current income subject to relief under section 89.

further, , legally it is mandatory to transfer EPF Account at the time of job change. But, people generally don’t do it; instead of transferring, they withdraw the amount. From 10 Feb 2016 You cannot withdraw Employer contribution to EPF before 58 years.

hope u understood clearly that it is overall depends upon completion of 5 yrs.