Encashing of PF before end of 5 years

I worked for an organisation from July 2012 to Dec 2015.during this period i was contributing about 30000 rs every financial year towards my PF account and was claiming IT benifit for the same in my returns.on leaving the organisation i withdrew all my accumlated PF and 10 % TDS was deducted by the organisation on the same amount. My CA now says that since i withdrew the fund before completion of 5 years so all the rebate claimed by me during the IT returns of all these years become void and now i will need to refile the returns for all these years. My doubt is that since 10 % tds has already been deducted why does the rebate claimed  during the previous years become void.please advice.
Asked 11 months ago in Income Tax from Lucknow, Uttar Pradesh
No, the rebate claimed will have no effect and no tax is payable on that. However the Pf fund you have received from your company contribution and interest shall attract tax in current year and shall be set off against tds deducted w.e. from 01/04/2016.
Vishrut Rajesh Shah
CA, Ahmedabad
598 Answers
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Hi,
yes, your CA is correct.
An individual has to pay tax on withdrawal of PF accumulations if the same has been withdrawn from a recognized PF account without rendering continuous services for five years or more with the employer. 
On change in employment in the past, if the accumulated PF balance has been transferred to the PF account of the new employer, then the period of previous employment should also be considered as part of continuous service and accordingly, the five years is computed. 
Since this is your first job with the current employer and the total period of service with the employer is less than five years (i.e., four years), if you withdraw the PF balance, it shall be taxable in the financial year (FY) of withdrawal.

The aggregate of employer’s contribution to PF and interest earned thereon will be taxable as salary.

Further, to the extent of the deduction claimed by you under section 80C of the Income-tax Act, 1961, on your own contribution to the recognized PF shall be taxed as salary.

Also, the interest earned on your own contribution to PF shall be taxed as “income from other sources”. The tax rate would depend on your applicable income slab in each of the FY(s) during which the PF contributions were made. Further, the surcharge (as applicable) and education cess, shall be applicable, for each of the FYs will also be payable in addition to the basic income tax. 

If the cumulative years of service with the current and new employer are more than five years, the withdrawal will not trigger tax liability. 

IF you have terminated the service due to your ill health, or discontinuance of employer's business, or reason beyond employee's control, the amount will be Tax exempt.

you can refer the following site:
http://www.planmoneytax.com/tax-on-epf-withdrawal-new-tds-rule-flowchart/
Vishakha Agarwal
CA, Bangalore
404 Answers
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Dear Sir,

Yes, your CA is right to a certain extent. You have to pay tax on PF but no need to revise the return of earlier years. It will be considered income of current year.

The employer’s contribution and interest, thereon, would be fully taxable as as profits in lieu of salary or ‘salary income’ in the hands of the individual.

The employee’s contribution would be taxable to the extent of deduction claimed under Section 80C, if any, under the Income-tax Act,1961

The interest earned on employee’s total contributions would be taxable as ‘income from other sources’ in the hands of the employee.

Please feel free to call/revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
1997 Answers
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Sir since you are in conversation with Vishaka I will not comment on the issue and hope you are comfortable with the answers. 

For more queries you can mail at modani005@gmail.com
Shyam Sunder Modani
CA, Hyderabad
1390 Answers
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Hi,
yes, you can do that. but that is not the correct way to show it as your income. you are not going to revise your previous years return in
if you had claim EPF (employee contribution) as deduction under section 80-C for last three years of your IT return filing then only you need to add back and show it as your income
.
sure you can claim 10% TDS while filing IT return, it must be reflect in 26AS, it is just that you have already paid tax and if no income tax liability arises then this TDS amount will be refunded to you.
Vishakha Agarwal
CA, Bangalore
404 Answers
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  Talk to Vishakha Agarwal
The question is being asked to Vishakha Madam.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
1764 Answers
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