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Pf withdrawal before 5 years of service

Ankit (None) (75 Points)

01 January 2017

Hi guys! Consider this, 'X' left his job in August, 2014 and got Rs. 3, 60, 000 as his PF payout in April, 2015. He was told by some people in his job that this money won't be taxable. But when he went to C.A in July, 2016 to file his return he was told it is taxable since he left job before 5 years. C.A asked him to get the data about the various heads in this amount. 'X' received this data in December, 2016 showing contributions like Employer contribution, Employee Contribution, Interest etc. What is the correct method for the tax calculation here? Thanks and happy year!

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2 Replies

KAVIRAJA ADDANGADI (PROPRIETOR) (16002 Points)
Replied 01 January 2017

Any investment which gives tax deduction comes with a lock-in period. Except the ELSS ALL all other tax saving investments have minimum lock in period of 5 years. So is the case with EPF. The investment in EPF may have given you the tax saving of upto 30%, it depends upon the tax slab you have been in all previous years.

Employers contribution exempted interest component exempt only employee contribution enjoyed deduction will be subject to tax liability.

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Ankit (None) (75 Points)
Replied 01 January 2017

Originally posted by : KAVIRAJA ADDANGADI

Any investment which gives tax deduction comes with a lock-in period. Except the ELSSall other tax saving investments have minimum lock in period of 5 years. So is the case with EPF. The investment in EPF may have given you the tax saving of upto 30%, it depends upon the tax slab you have been in all previous years.

May I know the process. I did some research and found out that employer contribution and interest will be treated as salary, employee contribution would depend on income tax slab of particular years and it's interest as income from other sources.