Hi I worked in two MNCs in the last nearly 4 years comprising 2 years (Sep 2015-Aug 2017) and 3 months (Ap 2018 - June 2018) respectively and wish to withdraw my entire PF amount. I am now a freelancer as my age is 59. My second company expected a huge project which got dropped so we were rolled off. Subsequently, I did not try for a job thus total PF contribution was for 2 years and 3 months only. I am told, PF amount withdrawn without continuous 5 years service is taxable at 10% if PAN is verified. I also read that we can state the reason for leaving the second company as the closure of business and thus the PF amount withdrawn is not taxable? Supposing, I hold the PF amount and withdraw it after 5 years, is it still taxable? I do not have any other income now except some Rs8,000/- pm as interest from FDs. If I can't escape deduction by the PF department then I may have to pay and take a refund later since I don't have any other income, is this correct? Kindly advise, what will happen in my above scenario. regards Vijayan Aravamudhan
Dear Sir,
Hope you are doing well !!
Yes it is correct.
All withdrawals made before completion of 5 years of continuous service are subject to tax. Withdrawals after completion of 5 years of continuous service in the EPF are tax-free.
If the employee shifts jobs and in the process has different PF account, it will be considered as continuous service to the scheme provided there has been no gap in contributions.
Hi
Yes, PF withdrawal shall be taxable in this case. Even if you withdraw after 5 years, it would be taxable as the limit of 5 years is of continuous period of service.
However, the basic exemption limit of 2.5 lacs shall be available.
Yes, you'll have to take a refund on return filing for the TDS so deducted on PF withdrawal.
There won't be any benefit in holding the EPF for 5 years if you are not doing service because it will be taxable even then.
Also since you are withdrawing EPF after your age is 58 and your employer's have discontinued business no TDS would be deducted on same and you will not be required to pay any tax on same. You need to ensure this while filing your PF withdrawal form.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
Hello,
Yes, your PF withdrawal would be taxable.
Since there will be no continuous period of service, it will be taxable even if you hold the PF amount and withdraw after 5 years as there will be no contributions.
You can claim the refund of TDS on PF withdrawal as per your other income.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
Hi,
- As you did not provided services continuously for five years therefore TDS was deducted by the PF department and it is your liability to pay tax on it. Closure of business is not provided under the Act.
- Period of service matters. Holding of PF for five years after leaving the service will not matter.
Thanks
Hello Sir,
In your case, PF withdrawal is not taxable.
"There are certain cases when withdrawal before five years does not become taxable. These cases are as follows:
a) If the service is terminated due to employee's ill health;
b) Due to discontinuance of the employer's business;
c) Or any other reason beyond the control of the employee."
Hi
Its taxable in your case,as continues service of 5 years is not there.
Yes you can take refund,at time of return filing.
Hope it helps
