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TDS on Provident fund

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Ashish

Chartered accountant

156 Points Posted on 03 January 2021

Dear Experts,

Pf withdrawal before 5 years is taxable under head salary, but Tds details are showing in TDS2(i) Income other than salary.

is it under same or should be change to schedule TDS1?

Replies (3)

Quick Summary

This discussion clarifies the tax treatment of provident fund (PF) withdrawals made before completing five years of service. It explains that while the employer's contribution and any claimed employee contributions are taxed under 'Income from Salary', the interest earned on both is typically taxed under 'Income from Other Sources'. The thread confirms that TDS details for these withdrawals should appear under TDS2(i) as income other than salary.

Finwealthcare

Financial Consultant

134 Points Posted on 03 January 2021

PF Withdrawal before 5 years includes Employer & Employee contribution amount and Interest earned during period of service.

Interest earned on both employee’s contribution and employer’s contribution shall become taxable as ‘Income from other sources’.

Employers’ contribution by employer will become taxable "Income as Salary" at the time of withdrawal.

Employee’s Contribution shall become taxable as ‘Income from Salary’, if while making the investment you had claimed it as an investment deduction under section 80C. If not, then it won’t be taxable, since you would have had paid tax on it while making the investment.