Method of tax calculation for PF before 5 years service

From the statements made by you, it is difficult to give an opinion on the workings of your CA. The following general principles may, however, give you an understanding of the situation broadly described by you.

1) The employer's contribution to PF is not taxable, provided it is within the limits specified under the Income Tax Act. In your case, the employer's contribution can be assumed to be within the limits and hence not taxable in your hands.

2) You might have claimed deduction u/s 80C in respect of your contribution, as mentioned by you.

3) The interest on PF is not taxable.

4) The PF received by you during FY 2015-16 is not taxable.

5) The rebate u/s 89(1) applies when you receive arrears of salary. This is basically to even out the additional tax that may arise due to the change in the slabs because of lump sum receipt. In your case, there appears to be no need for relief u/s 89(1).

Dear Sir,

If you are receiving this Provident fund income after your job period of 5 years than you will get 100% Amount as tax free under Section 10 & as relief and no tax shall be payable on the said amount.

While I read the text of your query, I just read the heading of your query, according to which the PF is withdrawn before completion of 5 years of service. In such case, the PF withdrawn will be taxable as other income. The employer's contribution, your contribution to the extent you claimed deduction u/s 80C and the interest will be the income of the year in which you received the money. Further, as this is not in the nature of arrears of salary, you will not get the benefit of deduction u/s 89(1) also.

If PF withdrawn before 5 years of continuous service , It is taxable in the hands of individual.

In such case the payment received in respect of Employer contribution along with interest thereon is termed as Salary and taxed under the head income from Salaries.

Interest received/ accrued on Employee contribution is taxable as Income from other sources.

Amount received towards employee contribution is not taxable to the extent deduction claimed earlier . It means it is exempted.

If you dont have any income other than the Employer contribution PF, Interest there on and interest on Employee contribution then there is no tax liability. You can file the return showing this income which is below taxable limit.

Hello Sir,

While calculating the working the income has to be clubbed in the year of income and shall be taxed at the rate in which you would have been taxed in that year considering no investment was made by you.

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

No sir, it shall be as per current tax slab only. I.e. 10% in your case.

As mentioned in my earlier answer, the employer's contribution will also be the income to be added.

Dear Sir,

Calculation done by your CA seems to be correct. It would be the income of current year if you have withdrawn the of before stipulated time.

Please feel free to revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com