The provision should be interpreted like this:
If you want to withdraw the PF, you should submit the claim form. This claim form can be submitted after waiting for two months of leaving the organisation. After leaving the first organisation if you get employed in another organisation to which PF applies, then you cannot go for withdrawal benefit. At the same time if you get employment but in an organisation to which the PF is not applicable (say, due to less number of employees) then also you can claim withdrawal benefit.
Now, coming to the next part of the query, PF amount withdrawn after 5 years of service will be tax free. At the same time, if you withdraw PF before completing 5 years of membership, it will be taxable at the rate of 34.608% as if the income of claimant from all other sources is at the maximum of IT slab. Therefore, in order to show that the member withdrawing the PF does not fall under income tax he has to submit to the EPFO a form, viz, form 15G/ 15H along with the PF withdrawal forms. Form 15G is for persons below the age of 60 years and form 15H is meant for senior citizens. However, no tax would be deducted at source if the total amount from the PF is Rs 50000 or less than Rs 50000.
If you transfer the PF to new PF account created at the new p[lace of employment, no tax would be deducted.
If you have closed the PF by claiming the withdrawal benefit, the UAN will cease to exist and in such cases, on joining the new establishment you will be allotted a new UAN.
Withdrawal of PF will certainly put an end to your service and with each entry to a new establishment the service will get reset. However, if you do not withdraw the Pension Fund at each occasion of job change or if you opt for "scheme certificate" in lieu of withdrawal benefit whenever you shift a job, your continuity of service with regard to pension will be maintained.
It is not mandatory that when you withdraw PF, you should withdraw both the Provident Fund as well as Pension Fund.
Madhu.T.K