income tax on PPF closure before 5 yrs

[janes joseph]

PF/VPF qamount is normally free from tax, including interest gained on it. But if its closed before 5yr continuous service, then its taxable.

So, if i close my account before 5 yr but the final amount i receive will not cross my tax limit for that FY, then should i pay any tax on PF/VPF ?

Say, if i have a total income including pf closure amount within 2 lakhs/2.5lakhs(new limit), I dont have to pay tax, right ?

[CAGOPALJI AGRAWAL]

If total income is below taxable then no tax is payable.

[janes joseph]

Hi CA GOPALJI AGRAWAL,

Is it like:

Employer’s Contribution and interest there on: Taxable as Salary Income.

Employee’s own Contribution : Taxable under the head income from other sources as special income u/s 111 @ 10%.

Interest on employee’s contribution: Taxable as income from other sources as special income u/s 111 @ 10%.

So is there a rule that the basic exemption limit is not applicable on special income ?
 

[CAGOPALJI AGRAWAL]

No the basic exemption limit would be available.

[CAGOPALJI AGRAWAL]

Please read , after no. I mean basic exemption limit is available.

AI Summary

Taxability of premature PPF closure: employer and employee contributions treated as taxable income, basic exemption applies. Employer contributions and their interest on premature provident fund closure are treated as taxable as salary; employee contributions and interest are treated as taxable under income from other sources as a special income category, with the basic exemption threshold available to determine whether tax is payable.