Is recognised PF withdrawl with in 5 years is taxable?

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VIKASH BHALOTIA (Querist)
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06 October 2008 I have been worked 9 month in one company. now i have resigned from that company & want to withdraw employer cont. & Employee cont. to withdraw wheather it is taxable.

K V Subba Rao

K V Subba Rao (Expert)
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06 October 2008 Rule 8 of Part A of the Fourth Schedule of I T Act provides the circumstances under which the accumulated balance payable to an employee is exempt from tax . If employee fulfills any of following conditions, payment from recognised provident fund is tax free :

(i) if he has rendered continuous service with his employer for a period of five years or more, or
(ii) if, though he has not rendered such continuous service, the service has been terminated by reason of the employees ill-health, or by the contraction or discontinuance of the employers business or other cause beyond the control of the employee, or

(iii) if, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognised provident fund maintained by such other employer.

Continuous Service in Case Of Job Hopping

Explanation to Rule 8 provides that in case balance payable to an employee includes amounts related to fund maintained by former employers and transferred to new recognised fund from which payments are being maintained, continuous period of five years shall be counted by aggregating the numbers of years with other employers

Based on the above Rule position, if you withdraw balance from PF account, you have to pay tax.

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