EPF withdrawal scrutiny response

Yes, you have to write letter explaing the error and also supporting in regard to that

If you want you can connect with me to solve the same

Showing the amount under wrong heading is an apparent mistake from record and can be resolved using rectification u/s 154. This is not something to worry about in case the withdrawal is genuinely exempt which is typically the case when it’s done after 5 years of continuous service.

You're Absolutely Right About the Section Error

Yes, the issue is citing Section 10(11) instead of Section 10(12):

• Section 10(11): Statutory Provident Fund

• Section 10(12): Recognized Provident Fund (EPF) - This is correct for your case

Tax Exemption Rules - No Worries

No Upper Limit & No Age Limit

• Entire EPF balance is 100% exempt after 5+ years of service

• Your 25+ years = complete tax exemption

• No monetary cap applies

• No age restrictions for withdrawal

It is a scrutiny limited only to the verification of exemption claimed. Submit basis for the exemption claimed

Please find below draft reply for your reference 

1. Nature of the Amount: The amount withdrawn represents the accumulated balance of my recognized Provident Fund, which includes my own contributions, my employer's contributions, and the interest accrued on both.

2. Basis of Exemption: I am an employee who voluntarily retired after more than 25 years of continuous service. The accumulated balance paid from a recognized provident fund is exempt from tax under Section 10(12) of the Income Tax Act, 1961, provided the employee has rendered continuous service for a period of five years or more.

3. Rectification of Error: I wish to clarify that in my tax return, due to a clerical error, I had incorrectly quoted Section 10(11) instead of the correct and applicable Section 10(12). The exemption is factually and legally correct under Section 10(12).

4. Supporting Documents: Also attached following documents 

   • Bank account statement reflecting the credit of the withdrawn amount.

   • Relevant documents related to my voluntary retirement.

1. Why scrutiny was raised

• Section 10(11) applies to Statutory Provident Fund (SPF) and Public Provident Fund (PPF).

• Section 10(12) applies to Recognised Provident Fund (RPF), i.e. EPF maintained under EPFO.

• Since you quoted 10(11) instead of 10(12), CPC flagged it for clarification. It’s not a denial — they just want you to justify the exemption correctly.

2. Your eligibility for exemption

• You completed more than 5 years of continuous service (25 years in fact).

• EPF withdrawal after 5 years of continuous service is fully exempt under Section 10(12).

• There is no upper monetary limit on exemption, and no age limit condition. The only condition is 5 years of continuous service.

• Since you retired voluntarily after 25 years, the full withdrawal is exempt.

3. Suggested wording for response

You may respond along these lines (attach EPFO passbook + bank statement as proof):

“The amount reported in Schedule EI relates to withdrawal from my recognised Employees’ Provident Fund account maintained with the Employees’ Provident Fund Organisation (EPFO).
I had more than 25 years of continuous service, and the withdrawal was made on voluntary retirement. As per Section 10(12) of the Income-tax Act, 1961, read with Rule 8 of Part A of the Fourth Schedule, any accumulated balance payable from a recognised provident fund is exempt from tax if the employee has rendered continuous service for five years or more.
The reference to Section 10(11) in the return was an inadvertent mention. The correct section is 10(12). Supporting documents such as the EPF passbook and the bank statement evidencing credit of the amount are attached.”

Thanks & Regards,
CA Damini Agarwal