Navigating PF: Should I Withdraw or Transfer My Old Company PF and Is It Taxable?

I need advice on the following matter.

I have still not withdrawn my PF from my old company. I am planning to either withdraw or transfer my PF. What is the best and easiest option? Is PF withdrawal taxable?

Hi Madhu, I worked for an organization from July 2005 to May 2007. I would like to withdraw my PF now. Will it be taxable? I heard that if we have not completed 5 years with that PF account, there will be a 33% tax on the withdrawal amount.

Regards, Mahesh

Tax Implications of PF Withdrawal

If the PF is administered by the EPF Organisation, then it is non-taxable even if it is withdrawn before five years. However, depending upon the trust rules, the amount held in a private trust may become taxable if withdrawn before a specific period, i.e., five years. The Income Tax department has raised an objection to the EPF Organisation for not making the withdrawal before five years taxable.

Regards,
Madhu.T.K

Hi Madhu, I heard that the PF organization issued a notification in December 2010/January 2011, requesting all practitioners to settle their 2-3 years old PF accounts before March 31, 2011. It was mentioned that failure to do so would result in being put on default, and no tax benefits would be provided on the PF amount. Could you confirm if this information is still valid? I am looking forward to a favorable response. Thank you in advance.

Regards, Mahesh P

Sorry, I didn't understand your message clearly. PF has requested all 'practitioners' to settle their accounts, and if they fail to do so, will no tax be paid?

There was a circular stating that if an account remains inactive for more than 3 years, no interest will be paid on that account for the period exceeding 36 months (3 years). Is that what you meant?

Regards,
Madhu.T.K

The circular is in force. Therefore, if any PF account remains inoperative for three years, please withdraw the PF accumulations. If necessary, collect a scheme certificate for the Pension Fund. Naturally, if you have worked in the organization for at least 10 years, you cannot withdraw the Pension Fund. In such a situation, you have to opt for a Scheme Certificate only.

Regards,
Madhu T.K

I worked in a company from May 07 to Aug 11 and am currently employed elsewhere.

Question 1: Taxability of PF Withdrawal

If I go ahead and withdraw my PF, will it be taxable? The last company is Genpact, which may or may not have deposited the sum in EPFO.

Question 2: Reason for Taxability

If "Yes" for Question 1, why would the withdrawal be taxable if my salary component for which I have already paid taxes?

Appreciate your help in advance.

Regards