amount in d recognised provident fund account can be withdrawn at d end of 5 years of continuous employment n it will be tax free. Can d employee if continuing in service for d 6th year again withdraw accumulated amount in d 6th year n will it be tax free? and can he do so every year?
22 January 2009
On withdrawal from RPF at the time of termination of service, the accumulated balance is exempt from tax only if you have been in continuous service for a period of five years or more.
Service rendered to the previous employer is also to be included.
If the continuous service is less than five years due to reasons beyond your control (ill health, or discontinuance of employer's business), you still will be eligible for exemption.
If not, then you will be taxed on withdrawal of the accumulated balance from the RPF.
Withdrawals from the PPF account is based on defined eligibility criteria. Such withdrawals are not taxed.
22 January 2009
It is exempt in the following cases:
1. In the case of an employee who has rendered continuous service with his employer for a period of 5 years or more, or 2. In the case of an employee whose service has been terminated by reason of ill health of the employee or due to the discontinuance of the employer’s business or other cause beyond the control of the employee. 3. In the case of an employee who obtains employment with another employer who maintains any RPF to which the accumulated balance becoming due and payable is transferred.
In all other cases, where repayment is made, an employee will be liable to be taxed on the earlier exempted amount. Even the employer contribution and interest accumulated on the entire amount shall be taxed to income under the respective heads of income.
22 January 2009
At the time of switching jobs, the employer generally gives the option of withdrawal or transferring the balance in your provident fund account to your new employer. In such a case, the accumulated balance due and becoming payable (gross amount) shall be exempt from income tax if it is transferred to your account in the recognised provident fund maintained by your new employer (irrespective of employment period).
22 January 2009
Yes, It will be taxed, in my opinion... As the accumulated amount was already withdrawn and the amount withdrawn in 6th year is new one, it will be taxed.
23 January 2009
As I understand, you propose to withdraw by either of the following methods:
(1) Withdraw accumulations during first to fifth year, in sixth year, if so, accumulations from sixth to tenth year could be withdrawn only in eleventh year
(2) Withdraw accumulations during first year in sixth year, of second year in seventh year and so on.
This is definitely an intelligent idea and you adopt it for National Savings Certificates but can't do it Provident Fund because question of withdrawal of accumulated balance in PF arises when it becomes payable.
So find out when accumulated balance in PF "becomes payable". It is on CESSATION of employment (barring exceptions for house and medical purposes etc)
While continuing in service, it is not possible to withdraw PF except for specified purposes; so question of taxability does not arise
CAclubindia
