Income tax on Provident Fund settlement.

This query is : Resolved

Srini Cherukupalli (Querist)
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22 March 2008 Dear Sir / Madam,

My Provident Fund got settled ( both the Member & Company contributions), Rs. 47, 293 after resignation with my previous company and the amount, Rs. 19,903 (more than 40%) has been deducted on this as per Rule 10 of part A of Schedule IV of the Income Tax Act, 1961. I would like to know whether this settlement has been done correctly or not.

Thanks a lot for your information on this.

Regards,
Srini.

HARANATH

HARANATH (Expert)
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22 March 2008 i guess your issue is something related to sec.192 of income tax act 1961. according to that tax should be dedecuted as per rates applicable to individual and the slab in which you belong. 40 % dedection is unfair.
thanku.

Srini Cherukupalli

Srini Cherukupalli (Querist)
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22 March 2008 Thanks a lot for responding on this query. Unfortunately, I don't have any other details on this. I'm providing my details here which may be helpful to better understand this query. First, I have joined in a India software firm in India. After that, I came to overseas (U.S) on company assignment and I left the company and joined in U.S company here. I have attained NRI status at the time of closing my PF A/C and my gross salary per annum was Rs. 5.4 lacs. Please provide me the best solution as you can.

Regards,
Srini.

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K V Subba Rao

K V Subba Rao (Expert)
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23 March 2008 Accumulations in PF Accounts, if withdrawn for settlement before retirement on superannuation are taxable (subject to exceptions). So your ex-employer would have deducted tax. Highest rate of individual tax is 30 percent plus Cess. The Company would have deducted Tax on PF settlement correctly. You apppearently find it to be more than 40%. Generally this may be due to short deduction for any reason on your salary income before leaving the Company. To our knowledge, almost all Companies have good expertise in IT matters and you dont't have to worry unnecessarily.

Reetika Goel

Reetika Goel (Expert)
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23 March 2008 The amount of PF is exempt in the hands of Employee if certain conditions are satisfied:
1) Worked for 5 years under the same employer or with 2 or more employers but with same PF account.
2) Left the job before 5 years for the reasons uncontrolable in the hands of employee.
and 2 more conditions are there...........

since in ur case, it seems that u have not worked with that employer for continuous 5 years and neither u got ur PF account transfered to the other employer, tax shall be deducted @ 30% plus 3%(edu. cess).

But, since u are saying that ur deduction exceeds 40%, then there may be two possibilities.....
1) Ur salary dedutions might have been short which are now covered from this amount.
2) U may have taken sm advance from the company or used its assets while in job. Nw they have debited ur amount with that facility or advance to give u full and final payment and named it as PF amount.