There is income tax on PF withdrawals within 5 years of employment . If a person joins an organisation, say around 55 years and retires at 58, will the PF withdrawl on retirement attract income tax ? Logically , it should not . What is the legal point ? Arising out of this, I understand PF authorities have to deduct TDS if there is withdrawal of PF amount within 5 years of employment. Will it apply to retirement cases also, as cited above ?
2 Replies
R Srinivasan
(Costing)
(60 Points)
Replied 10 June 2014
Tks for responding. My query is whether withdrawal @ retirement ( though the period is less than 5 years of service ) need not be taxed as anyway it is retirement on reaching superannuation and the assessee cannot be taxed only because it is less than the prescribed 5 years. Can this be clarified pl ?
C.A. Jignesh N. Mehta
(C.A.)
(1030 Points)
Replied 10 June 2014
There is no clarity on this in the rules of fourth schedule of IT Act.
Yes after attaining age of 55 years, one can produce Form 19 and withdraw the amount but its taxability is not clear.
Plain reading of rules suggest that since 5 years service is not completed and hence it shall be taxable.
I suggest you to take legal advice on above if amount is material enough.
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