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The withdrawal of the accumulated balance
from a recognized PF triggers tax liability only if the employee has not
rendered continuous services for five years or more to the employer. While
computing the continuous services of five years, the period of previous
employment is also included, if the accumulated balance maintained with the
old employer is transferred to the PF account with the new or current employer.
Since you had already rendered service with
the employer company for five years and seven days, there should not be any
tax implications on withdrawal of PF. However, you would be required to
report the PF accumulations in the tax return form to be compliant from
disclosure perspective.
If the total number of years of service with a company are less than five
years, withdrawal of accumulated PF balance shall be taxed in the financial
year of withdrawal.
The total of employer’s contribution plus interest thereon will be taxed as
salary. Further, the amount of tax benefit claimed under section 80C on
account of your own contribution to the recognized PF shall be taxed. Also,
the interest on your own contribution shall be taxed as “income from other
sources”.
The tax rate would depend upon your
applicable income slab in each of the fiscals during which the PF
contributions were made. Further, the surcharge (as applicable) and
education cess, shall be applicable for each of the fiscals and payable in
addition to the basic income tax. Relief under section 89 shall be available
as applicable.
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Further,
withdrawal of the PF accumulations will be as per the provisions of the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Accordingly,
it would be required to have a cooling period of two months.
Alternatively,
you can transfer the accumulated PF balance to the PF account to be maintained
with the new employer.
For more information, mail it to compliance@karmamgmt.com
Also register yourself for the upcoming event - comply4hr.co.in/comply4hr2014/edm.html
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