Understanding PF Withdrawal Tax: Does a Break in Service Affect Your Tax Liability?

Hello there, I have a total of 4.5 years of job experience. Job 1) 3 years Job 2) 1.5 years. There was no gap between job 1 and 2, and the Provident Fund (PF) was transferred to the new company's PF account. After 1.5 years at job 2, the company closed. However, on good faith, we were given time to resign gracefully (i.e., no termination from the company's side).

Currently, I don't have any job. My 4.5 years of experience ended in February 2015. Now, my question is, will the PF withdrawal after August 2015 (i.e., after completing 5 years since the first PF submission) have tax liability?

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Please refer to this link: [Tax on EPF withdrawal | Be Money Aware Blog](http://www.bemoneyaware.com/blog/tax-on-epf-withdrawal/). It deals with PF withdrawals and tax implications.

If you had to stop working because the business closed, this special case is also addressed in this informative link.

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You will not have any tax deduction on your EPF claim amount. However, there is a new rule implemented in the EPF organization. If a person works for less than 5 years and the claim amount exceeds 30,000, then TDS deduction will be applicable.

Dear Dhawalbanker,

Generally, income tax is applicable to PF if the service is below 5 years and the amount is above Rs. 30,000 (for both PF amount and withdrawal benefit from the pension fund). However, if the cessation of service is due to the closure of the establishment, the amount may not attract income tax, provided you can produce the evidence. I suggest consulting with the Income Tax and PF authorities for further clarification.

Abbas.P.S

My main question still remains unanswered. Is it 5 years of continuous service or 5 years since the first PF account was opened?

I am based in Pune. What is the proper way to communicate with Tax & PF authorities? I would prefer online first.

Dhawalbanker,

Did you read the link which I have put up? Under the provisions of income tax laws, withdrawal from the PF account by an employee without rendering continuous service for five years or more to the employer attracts tax. This is an extract from the article.

Dear Dhawalbanker,

In EPF, continuous service means the total service period after deducting any non-contributory period, if applicable.

Abbas.P.S

Ah, I forgot to mention one piece of information in the questions. When I said the company closed, it didn't actually close. They just told all the employees to resign gracefully. However, the company, on paper, is still running.

So, my PF is good with interest till 3 years from the last month of the PF contributory month. Before that, if the company also closes on paper, can I withdraw PF without tax?