PF withdrawal when taxable

[udit gupta]

Dear Sir, Please advise me when PF withdrawal will be taxable. What is the rule. Regards Narendra

[Surender Gupta]

Pl. see fourth schedule to the Income Tax Act, 1961 dealing with provident fund.

[CAGOPALJI AGRAWAL]

8.   The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be excluded from the computation of his total income—

(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 employee's ill-health, or by the contraction or discontinuance of the employer's business or other cause beyond the control of the employee, ¹⁷[or]

¹⁸[(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 provident fund maintained by such other employer.

Explanation.—Where the accumulated balance due and becoming payable to an employee participating in a recognised provident fund maintained by his employer includes any amount transferred from his individual account in any other recognised provident fund or funds maintained by his former employer or employers, then, in computing the period of continuous service for the purposes of clause (i) or clause (ii) the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall be included.]

[DEV KUMAR KOTHARI]

Dear udit gupta, which Pf you are concerned about. is it  with  EPFO or a   recognized PF , or unrecognized PF or PPF. Under what circumstances withdrawal is made. How the withdrawn amount is used. and some relevant information may have to be considered for the purpose of answering query properly.

Please give full facts and circumstances in which withdrawal is being made. You are having the problem, so you must have at least some relevant information about relevant law- section of particular law, Rules , schemes etc. Share the information and knowledge which  you have, then expect some brain storming  and discussion.

AI Summary

Provident fund withdrawal tax exemption depends on continuous service, ill health, business cessation, or transfer to recognised fund. Accumulated balances from a recognised provident fund are excluded from taxable income if the employee has rendered continuous service for five years or more, or if service ended due to ill health, contraction/discontinuance of employer's business, or other causes beyond the employee's control; transfers of accumulated balances to a recognised provident fund maintained by a new employer preserve the exclusion and prior service under former employers is included in computing continuous service.