The withdrawal of the accumulated balance from a recognized PF is taxable if the employee has not rendered continuous services for five years or more to the employer. While computing the continuous services of five years, the period of previous employment is also included, if the accumulated balance maintained with the old employer is transferred to the PF account of the new employer.
We understand that you have rendered service for 34 months. Assuming that this was your first job or you have not transferred the PF balance, if any, from the previous employer, if you withdraw your PF, it shall be taxable in the year of receipt. Continuing to keep the PF balance and withdrawing after five years of its start will not change the taxability. If you do not continue employment and start some business or retire, withdrawal of the accumulated balance from PF would be subject to tax.
The total of employer’s contribution plus interest thereon will be taxed as salary. Further, the amount of tax benefit claimed under section 80C of the income-tax Act, on account of your contribution to the recognized PF shall also be taxed as salary. Also, the interest on your own contribution shall be taxed as “Income from other sources”. The tax rate would depend upon your applicable income slab in each of the FY (s) during which the PF contributions were made. Further, the surcharge and cess, as applicable, for each of the years will also be payable in addition to the basic income tax. In your case, since the PF contribution is spread over different FYs, tax rates of those years would have to be considered.
Tax will be deducted at source at 10% if the PF amount is more than Rs.30,000 and you provide Permanent Account Number (PAN). If PAN is not provided, then tax would be deducted at maximum marginal rate.
Separately, just for your information, the withdrawal of the PF will be as per the PF provisions, which requires you to have a non-employment period of two months after leaving your job. Since you have not been working for the past eight months, you can withdraw the accumulated PF balance immediately.
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