Confused About Provident Fund Contributions and Deductions? Let's Discuss!

Hi,

Can someone help me with this PF thing? I was employed with a leading BPO in Pune for almost 3 years. Now I am not in India and not working. I received the employer's contribution to my PF. When I received my contribution, it was 50% of the employer's contribution. My belief was that employers contribute 50% or equivalent. In this case, I have less than the employer's contribution. Can someone explain this theory? Also, let me know if tax is deducted from the PF Fund.

Thanks,
Shweta

Dear Shweta,

As far as PF is concerned, it is done with the following breakup:

- Employee contribution: 12%
- Employer contribution: 12%
- Admin Charges: 1.61%

Now, the Employer contribution of 12% is further broken down into 8.33% for the pension fund and 3.67% for the PF Fund. Since you have completed more than 6 months, you have the option to avail the fund provided in the pension fund or to obtain a certificate of the same by exercising an option in 10C and 19.

Thanks and regards,
Jayendra Chaturvedi

Thanks Jayendra...

However, I have a few doubts. Employers' contribution in my company was invested in a trust, and I received approximately 40,000 from it. However, my contribution, I received only 20,000. Does this mean that PF is taxable? And even if it is, then what is the applicable rate?

Lastly, I was not employed until September 07. After that, I am currently employed in UAE (TAX-FREE). So, is there any way I can get a tax refund? I also have a housing loan going on.

Regards,
Shweta

Dear Shweta,

PF FUND IS FULLY TAXABLE, SO THE AMOUNT WITHDRAWN BY YOU IS TAXABLE. ANY AMOUNT GIVEN BY YOU CAN BE CLAIMED BY USING FORM 16 IN MARCH OR APRIL 2008.

Thanks and regards,

Jayendra Chaturvedi

Dear Shwetha,

I perceive your question this way:

1. You are working for a company that has a PF Trust.

2. The contributions of the employer and employee are going to the PF trust which manages the corpus of the trust.

3. You have left the job and requested settlement. You were informed that you are liable to tax on the contribution.

You wish to know:

- The amount you are entitled to receive from the PF Trust upon your settlement.

You are entitled to receive back your contribution + employer contribution + accumulated interest. It is 12% of your monthly basic salary that is your contribution to PF (it must be reflected in your monthly PF). Assuming that your total PF contribution throughout your service is Rs. 20k, the employer is contributing an equal amount, i.e., Rs. 20k. You are entitled to receive back Rs. 40k + accumulated interest thereon.

- Incidence of Tax on such withdrawal.

As per the Income Tax Act, this withdrawal is taxable since you have not contributed for 60 months. However, a transfer is not taxable. Please note the employer's share of the contribution will be treated as your income for the year. You are liable to pay tax on the same. However, you will get relief under the act to a marginal amount if there are some changes in your tax liability.

- Steps to recover the TDS.

After computing your tax liability for this year, you can apply for a refund while filing your income tax return. However, you should file your return well within the due date for the admissibility of the refund.

Hope this is clear.

Regards,

Vishwanath

Dear Vishwanath,

I am currently working in the UAE. From May to September, I was unemployed. As you are aware, the UAE is tax-free. Secondly, I have a housing loan in my name. Can I avail the refund of tax?

Regards,
Shweta

Dear Shweta,

Anybody who is an Indian resident and working abroad, no matter whether it is tax-free income, if that money is brought into the country, it is taxable as income accrued outside by an Indian and it is taxable at a different rate. Yes, you can claim the refund.

Thanks and regards,
Jayendra Chaturvedi

Hi,

Thanks for providing useful information on this forum. I have a query and need help to understand it.

I worked for a company for 6 years and contributed to EPF every month. When leaving the job, I applied for the withdrawal of PF. After 3 months, I noticed two amounts credited to my account - one was a small amount and one was a big amount. My company's accountant informed me that these are from the Family Pension Fund and Provident Fund. He mentioned that since I have contributed for more than 5 years to EPF, I do not need to pay any tax on EPF withdrawal, but I will have to pay tax on the family pension fund amount (the small amount).

My concern is that the PF department did not send any letter or information regarding how they calculated the balance in my account, including whether they deducted tax on it or not.

I need help to clarify the following:

1) Is the family pension fund amount received from the EPF organization liable for taxation?
2) Has the EPF organization already deducted tax on it?

Thank you in advance for your assistance.

-- Satish

Hi,

I started my career and worked in Company A for 3 years. After that, I withdrew my PF account, which was taxed as I had not completed 5 years of service.

I then joined company B and worked for almost 4 years in Delhi. Later, I joined company C in Bangalore but left after 3 months and joined company D (my current company) in Bangalore.

I applied for the transfer of PF amounts from both B and C through D. The transfer of Company C's PF was successful; however, there is some delay and confusion regarding the transfer of B's PF.

My query is, if I withdraw the PF amount from Company B (as it's still not transferred), will it be taxed since I worked for less than 4 years?

Thanks.

Hi, I too have the same query. How is this 60 months of PF contribution considered - in a single stretch, from a single company, or a total of 60 months without a break or with a break? Can anybody help to understand this well? If the PF is taxable (LESS THAN 60 Months), then what is the meaning of PF if it's taxable?

Jai