Is My Provident Fund Withdrawal Taxable After 6.5 Years at MphasiS?

I have a small query related to the tax aspect of the Provident Fund. I have been working at MphasiS since February 2006. I resigned on the 18th of July and was released on the 25th of July 2012. I spent around 6.5 years in the organization, so I would like to withdraw my PF now.

Since I joined as an employee of MphasiS in Mumbai, my PF account was opened with the EPF office in Bandra, Mumbai in February 2006. However, due to a change in company policy, the PF account was shifted from Mumbai to Bangalore, Karnataka in February 2011 (after 5 years).

So my question is, since I got a new Bangalore-Karnataka PF account only a year back in February 2011, even though I have been working at MphasiS for the past 6.5 years as mentioned above, would the amount be taxable if I withdraw it now?

Thanks in advance.

Regards,
Syed

As far as I know, there is no difference in the taxation of PF whether it is from one account or multiple accounts.

I am a new member and will try to help you to the best of my knowledge. An employee who has worked for less than 5 years will have taxable PF withdrawals, while for more than 5 years, it will not be taxable. PF is considered a part of the employee's income. Hope this information was helpful.

Regards,
Ms. Naseeb Rajput
HR Manager
CBS Publishers & Distributors Pvt. Ltd.

Hi Mr. Saswat, thanks for the reply. Just to clarify, the withdrawal is not from multiple accounts. My PF amount got transferred from one account to another just last year due to a change in organizational policies. So my question is, would the PF amount be taxed if I withdraw now?

Many Thanks,
Syed

Dear Mr. Naseeb, Thank you for the response. I would like to draw your attention to the information I have provided in the query above. I have been with my current organization for 6.5 years. However, due to a change in organizational policies, my PF amount was transferred from Mumbai to Karnataka last year in February, with a new PF account number. My question is, if I withdraw the amount now, will it be taxable?

Many Thanks,
Syed

Dear Mr. Abbas,

Thanks for the reply. As mentioned above, I would like to withdraw the amount now. My question is, since the account changed from Mumbai to Karnataka with a new PF number only last year, although I have spent 6.5 years in the organization, would the amount be taxed now if I withdraw it?

Many Thanks,
Syed

Tax Implications of Provident Fund Withdrawals

PF is a "tax-free" investment vehicle that follows the Exempt-Exempt-Exempt regime, which means:

• Your contributions are tax-exempt.
• Your interest earnings are tax-exempt.
• Your withdrawals are tax-exempt.

I don't think it matters how long you have had an account (if my understanding is incorrect, please let me know). However, I read in the newspaper last year that EPFO will now start deducting TDS (I'm not sure if it's being implemented). If that's the case, then you would have to claim a refund on your income tax return.

Thanks,
Ravi

Clarification on Withdrawal and Tax Implications

You have to clarify what you mean by withdrawal. Do you mean that you are going for the final settlement of your account, which is possible only if you resign or retire, etc.? Or are you going to withdraw part of your accumulation for some authorized purposes such as building/buying a house or medical treatment, etc.?

Again, you should also clarify whether your EPF account is maintained by EPFO or by the company itself as an exempted Provident Fund. Your liability or otherwise to pay tax depends on all these answers.

Dear Sir,

I have resigned from my organization after a service of 6.5 years. My company used to maintain my PF in EPFO. I would like to withdraw the full amount as a final settlement.

I know that my withdrawal amount will not be taxable since I have completed more than 5 years in the above-mentioned organization. My query is, after 5 years of service, my company changed my PF account from Mumbai - Bandra to Bangalore-Karnataka. As a result of this, I got a new Karnataka PF number only last year in February 2011. So, would my withdrawal be taxed?

Many Thanks,

Syed

PF Withdrawal Taxability

PF amount withdrawal is taxable if it has been withdrawn within 5 years. However, in your case, the amount is transferred from one account to another account and is withdrawn only after five years; hence, it's not taxable.

Taxation Rules for Provident Fund Withdrawal

Checked with someone else; apparently, the taxation rule is as follows (disclaimer - this is from someone else, checked also on Google, but not from personal knowledge):

For withdrawal of the amount in less than 5 years from opening the account:

1. On own contribution to PF, no income tax.
2. Interest on own contribution to PF: taxable as income from other sources.
3. Employers' contribution: taxable as salary.

Logically, then, interest on employers' contribution should also be taxable as income from other sources.

Sharing Clarifications from Mr. Ravi Garg

Syed, why don't you share with the group the clarifications you received from Mr. Ravi Garg, as it is useful and beneficial for the people who have been following this thread?