Tax on Provident Fund Withdrawal

Got the following question in an email which Gurpreet responded to.

 

I have changed job and new employer has opened new PF account. I have a choice of withdrawing old PF amt or transferring to new.

If I withdraw PF, will it be treated as taxable income? If yes, can I save tax by investing partially in any government schemes / bonds?

Here is the response.

PF withdrawal is taxable if a person has worked in the company for less than 5 years. Tax cannot be saved even by investing in any govt schemes / bonds. It just gets added to income from salaries, and then the taxability will depend upon the Gross Income of the assessee.

 

Head Statutory PF Recognized PF UnRecognised PF
Employers contribution to PF Exempt from tax Exempt up to 12% of salary (Basic +DA) Exempt from tax
Deduction under sec 80C Available Available Not available
Interest credited on PF account Exempt from tax Exempt up to 9.5% Exempt from tax
Lump sum payment received at the time of retirement or termination of service Exempt from tax Exempt from tax: Only employees share of contribution is exempt
a. If the employee has worked for at least 5 years with the employer
b. If the service is terminated on account of ill-health or by contraction or discontinuance of the employer’s business or any other reason beyond control of employee
c. If the employee transfers the balance in his PF to his new PF a/c maintained by his new employer

Any thoughts on this – has anyone done this?

facebookShare on Facebook
TwitterTweet
FollowFollow us
PinterestSave

No related posts.

327 thoughts on “Tax on Provident Fund Withdrawal”

  1. Hi,

    I worked for a company from 2005 to 2006. I joined other companies and I didnt transfer the PF to my new employer accounts. Now I have been advised to withdraw that PF accumulation in my previous employer PF account. I am filling the required forms. But I am wondering can I give the salary account of my current employer & the cancelled cheque in the form? Will it be a problem if I give this salary account? Please advise.

    Thanks

    Reply

  2. Hi,

    I worked in one company 5.5 years and I left that company now. Instead of transferring my old PF account amount to new PF account I was planning withdrawal.

    Is that PF withdrawal amount will be taxable? If yes, how much % will be the taxable?

    If we withdraw PF amount before 5 years of service what will be the tax %?

    Thanks and Regards,
    Krishna

    Reply

  6. Hi Gaurav,
    TDS will be deducted on the withdrawal. You’ll need to confirm from ur HR / RPF office that how much is the Gross amount (Net amount received + TDS deducted). That gross amount you’ll show in ur Return of Income and while calculating tax liability you’ll consider the tax deducted on PF withdrawal.
    Hope this clarifies.

    Thanks & Regards,
    Gurpreet

    Reply

    1. Hi Gurpreet
      I tried to confirm the gross amount but I am not sure. I think no TDS was deducted by RPF on the amount that I had withdrawn. Is this the responsibility of RPF to deduct TDS or is it my responsibility to deposit the tax as self assessment tax? There is no entry of payment made to me in form 26AS. Does this mean that my amount was actually not to be taxed because i had made a withdrawal after 5.5 years of my PF a/c opening?

      Please tell me what should i do to track the amount of TDS/tax and how to deposit the same, if any. On what amount should i calculate the tax? employee contribution, or employer contribution or complete sum received?

      Thanks

      Reply

  7. Hi
    Please see my case and tell me if my PF withdrawal is also taxable or not.
    Worked in a company for 3 years. PF account maintained in RPF chandigarh office. Resigned to join different company. PF account maintained by Company trust in Bangalore. Withdrew PF from my first company after 2.5 years of leaving the service. i.e. after 5.5 years.

    Is PF amount still taxable?
    If yes, should the RPF deduct my TDS or it is my duty to show that amount in my return and deposit self assessment tax.

    Thanks
    Gaurav

    Reply

  8. Hi Gurpreet,

    If we have worked in a company for 4 years and 8 months and if we withdrae PF will it be taxable. As per the condition it should 5 years of continous service and if you check the law for Gratuity 4 year and 8 months are considered as 5 years of continous service. Does the same rule apply for PF withdrawl.

    Reply

  9. My question regarding PF is –
    1. I have worked for A company for 1 yr and shifted to B and transferred my PF to B. and after working for 3 yrs in B , i resigned. So tell me if i want to claim my PF , Is it taxable?
    2. another thing is – if it is taxable ,, so by when should i apply PF to avoid tax deduction..

    Right now i am not working anywhere… so it will be the same PF which it is right now………..
    what should i do ?? shall i go ahead and claim the PF or shall i wait for next year to complete five yrs.. ?? and how much will be the tax deduction

    Reply

    1. Hi Manisha,
      I’m afraid that it’ll be taxable, as this is EPF and we need to have regular contribution for 5 yrs…In ur case since ur not working anytime u withdraw it, it’ll be taxable.

      Thanks,
      Gurpreet

      Reply

        1. Manisha,

          Tax deduction will depend upon your last drawn salary with that co. The corresponding tax slab will be applicable as per the last drawn salary.

          Regards ,
          Gurpreet

          Reply

          2. Hi Gurpreet,
            I have a small doubt..currently am not working anywhere..i filled up my PF form and got signed with my previous employer..and i kept that form with for more than two years.IS THERE ANY LIMITED PERIOD TO WITHDRAW THE AMOUNT?

            waiting for your reply
            Thank you

            Reply

  10. Hi,
    I joined company A in jul, 2008 then on jan, 2010 i left it …then after a gap of a few months i joined company B… I wanted to transfer my pf a/c but employer at B said no need of doing this… previous and current pf a/c will get merged… after that i left my job at B on oct, 2010. I did not take any formal resignation from either of the two companies…
    1. Did my pf a/cs really got merged?
    2. How can i confirm that?
    3. How do i know the current status of pf a/c?
    4. If i try to withdraw the amount…will it be taxable? if so how much tax will be levied if say the sum accumulated is somewhere between 30k to 35k?
    5. I have heard that under current rules no one is allowed to maintain two pf a/c s. if it is true then am i on the verge of being prosecuted?

    Reply

    1. Hi Kiran,
      Foll r my answers to ur queries :
      1. PF’s don’t get merged automatically until u get the previouos PF transferred
      2. U can confirm that with ur HR
      3. Again consult ur HR
      4. Since ur working tenure is less than 5 yrs and u didn’t transfer it, it will b taxable if u withdraw it. however if u transfer all ur PF money to ur new a/c it will not b taxable
      5. This is not true, at least I hv not heard abt such thing that we cannot maintain 2 a/cs. however I beleive that we cannot open to PPF a/cs. These PF a/c which ur co opens up can be more than 1, as we may switch over other companies.
      Regards,
      Gurpreet

      Reply

  11. Hi Gurpreet,

    I was working in Company A for 2 years. I have transferred my PF when I joined Company B. In Company B I have spent 4 years 10 months. Now I am moving to Company C which doesn’t have EPF , hence want to withdraw PF amount. Is it taxable , if so How much?

    ~
    Amol Agare

    Reply

  12. Hi CJ,
    Yes absolutely you can wait for couple of months and then apply for the transfer of ur previous PF..
    Thanks,
    Gurpreet

    Reply

  13. Hi Gurpreet,

    I was working with an organization for 4 years which was deducting PF as part of the normal process.Now i have moved to an organization which doesnt come under the RPF category. Ideally i would have wanted to transfer my PF amount from earlier employer to avoid tax but in this case i cant.

    My question is what is the time period till we can avoid transfer/withdrawal of PF. Its been a month that i have joined the new organization. The reason i ask this is because my co is hiring employees and within 2-3 months might fall under the PF category. Can i apply for transfer of PF once my new co comes under the RPF purview.

    Kindly guide.

    Reply

  14. Hi Gurpreet!!

    I need urgent help!

    I worked in company A for 3 months and then I’m shifting to company B in Nov. I don’t want to tell comapnay B about company A. Can you please tell me what could happen if I do not tell my new employer about my previous PF account (closed but still in the 60 days period) ??

    Reply

    1. Hi Prateek,
      You can simply tell ur new employer that you want to open a new PF a/c and that will be all…..no need to hide it unless ur not showing ur previous experience

      Thanks,
      Gurpreet

      Reply

  15. I have worked in the previous organisation from June 2008-January 2011.If I don’t withdraw the PF for another two and half years will I get the interest on the PF amount for that period? And also if I withdraw the PF amount after the completion of 5 years will the amount be taxable?

    Reply

    1. Hi Saurabh,
      I’m not sure whether you’ll get the interest for that period or not. I’m not confident abt that…Also, since you’re not transferring that PF and rather waiting for just 5 yrs it’ll be taxable, as you’ll have to contribute to the fund regularly…
      Thanks,
      Gurpreet

      Reply

  16. I need one clarification regarding tax dedcutions on my PF withdrawal.
    1. I joined comapny A on Aug 14th 2006 and worked till Feb 9th 2010. Later joined company B and worked till April 24th 2011. I transferred the PF amount from company A to company B.
    2. When I left company B, I submitted the PF withdrawal form on June 22nd to company B.
    3. I n EPFO website of ‘to know claim status’ it was displaying that application got received on Aug 3rd and on Sep 23rd the application is approved and payment process under progress.
    My question is which date they will consider for completion of 5years? and whether there will be TDS deduction in my case? If they consider application approved date, then there should not be any tax deduction. But need to know which date they consider?

    Reply

    1. Hi Yashavanth,
      I’ve answered ur query via email….if u need further clarification…plz do revert

      Thanks,
      Gurpreet

      Reply

  17. Hi Gurpreet,

    I have worked for company ‘A’ for 4 Years and 5 months and shifted to B and working here from 1 Year and 2 months, But I haven’t transferred my PF account from ‘A’ to ‘B’.
    Now I want to shift to another company ‘C’, Can I transfer my PF account from ‘A’ and ‘B’ to new company ‘C’.

    Please answer my above question.

    Thanks
    Santosh Pola

    Reply

  18. My question regarding PF is –
    1. I have worked for A company for 1 yr and shifted to B and transferred my PF to B. and after working for 3 yrs in B , i resigned. So tell me if i want to claim my PF , Is it taxable?
    2. another thing is – if it is taxable ,, so by when should i apply PF to avoid tax deduction.

    Reply

    1. Hi Manisha,
      As per ur details i can see that the total period for which u worked without withdrawing ur PF is 4 years….as per IT act, if u wish to withdraw it it will be taxable..
      If u wish to withdraw it without being deducting tax, then you should get it transferred to ur new co as well, and once ur total tenure of contribution to 5 PF becomes 5 years u can get withdraw it..
      I hope this answers ur query…
      Thanks,
      Gurpreet

      Reply

      1. Thanks u so much for the response .. but right now i am not working anywhere… so it will be the same PF which it is right now.. so what should i do in this case ??

        Reply

          1. So, what should i do ?? shall i go ahead and claim the PF or shall i wait for next year to complete five yrs.. ?? and how much will be the tax deduction ?

            Reply

          2. So, what should i do ?? shall i go ahead and claim the PF or shall i wait for next year to complete five yrs.. ?? and how much will be the tax deduction ? waiting for the reply….

            Reply

  19. I have worked with one company in mumbai 2010 for 4 monts after left, now i m in delhi may i cash it, if yes then how, pls help us, if any contact number from i can get more info pls provide us…

    Reply

  20. I have a basic query.
    I am in the process of withdrawing my epf amount.
    The epfo office has a facility where I can check my pf balance online. However, the amount shown there seems to be only my part of the contribution. The employers part is not shown.
    So please tell me,when I withdraw the amount, will I get only my part of the contribution or both?
    It shows 28000. but that devided by the months of service at the employer comes to only 961, which is only my part of the contribution.
    And also please tell me if the pension fund also gets withdrawed in the process. If so, is there any employers contribution in this part?

    Reply

    1. Hi Ankur,

      U’ll hv to get in touch with the respective PF deptt as they’ll only tell u that why employer contribution is not showing up….if u withdraw it you should be getting employer contribution as well.
      I’m not sure about the pension fund part….apologies for that..

      Thanks,
      Gurpreet

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *