10% tax deducted from PF account

10% tax deducted from PF account

I quit previous employer after 4 years of service, and didn't get PF account transferred. It remained idle for 3 years and then I withdrew it last year (7 years completed of PF account) by providing details in the respected forms which are Form 19 (Revised), Form 10C, Form 15G (Manual filled 2 copies), Pan card and Cancelled Cheque.

When I am filing ITR1, I can see 10% tax was deducted and it is showing under Tax from other income.

Below are the questions:

Q: Why tax is deducted in first place?

Q: Now if I add pf amount as other income, it is falling in 30% slab; hence, additional 20% liability is coming. Why I should pay 30% tax on the PF amount which was accumulated during early years where full income was under 10% slab?

Asked 8 years ago in Income Tax

Hi,

1. If you withdraw PF before 5 years of completed service, PF department will deduct tax. Since, you have only served 4 years, they deducted TDS.

I ll get back to you on second question. Taxability of PF is a bit complex.

Abhishek Dugar

CA, Mumbai

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Talk to Abhishek Dugar

I am still waiting for your reply on TAX on PF withdrawal. Can you please provide the details on that?

Asked 8 years ago

Hello,

TAX was deducted because you should be working with the former employee for a period exceeding 5 years and in case of job transfer it should be transferred to the new organisation. So in your case your PF account was not closed by yu but it was not active either for 5 years. Hence the TDS.

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

2104 Answers

95 Consultations

Talk to Rohit R Sharma

Can you please answer the second question for the TAX slab applicability??

Asked 8 years ago

Hi,

Since you have not completed 5 years of continuous service, the PF withdrawn by you is taxable. Now, this 5 years means that there should have been contribution to your PF account by any of your employers, previous or current, for 5 continuous years.

The PF amount withdrawn will be taxed in the year of withdrawal. However, you can claim rebate under section 89 of the Income-tax Act. Simply put, the total tax payable by you in this year will be reduced by the amount of tax had that provident fund been taxed in those earlier years.

Trust this clarifies.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LLB