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I recently changed my job in December 2013 after working in a company for three years. My present employer did not tax me for the last three months of the financial year 2013-14. I also withdrew fully from my PF account and have received the money. Will my PF money count as savings and be taxed?
-Khushboo Singh
As per provisions of Indian income tax law, withdrawal of provident fund (PF) triggers tax implications in the hands of the employee if the same is withdrawn without rendering continuous service of five years with the employer. However, on change in the employment, if the accumulated PF balance with the old employer has been transferred to the PF account of the current employer, then the period of previous employment is also included as part of continuous service of five years as referred to above.
In your case, since you have not rendered continuous service for five years and have withdrawn the PF accumulation, the following components of the PF accumulation shall be taxable:
--Employer’s contribution to PF plus interest there on, will be taxed as ‘salary’
--Interest on your own contribution shall be taxed as ‘income from other sources’
You may also note that any amount of deduction claimed under Section 80C in previous years for contribution to the PF shall be reversed at the time of such withdrawal.
The writer is a practicing chartered accountant. Send your queries to >taxtalk@thehindu.co.in
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