Income tax on PF withdrawal before 5 years

prankur 1
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Hi, I was going through your answers related to EPF withdrawal. I understand from your answers that 1. employer contirbution and interest is taxable. 2. Regarding employee contribution, is it totally tax free or if I have claimed 80c deductions in previous years, then i need to pay tax on them as well? If I need to pay tax, then would that mean that i simply reverse the tax liability on those years. e.g. i got 20k deductions in 2008-2009 and taxable income was 4.9L. Now, should i pay extra tax assuming that taxable income was 5.1L and i should consider that years slab?

Its getting really complicated for me. Can you please help? Thanks, Prankur

tax-liability provident-fund epf-withdrawal income-tax
1 Answers

EPF withdrawal would only be taxable if five years have not been completed in EPF account (in case of EPF transfer, total duration).

80C deduction would also be reversed in case amount is withdrawn before five years. So amount from employee contribution would also become taxable. This would be taxable in year of withdrawal but you can claim relief u/s 89 by computing taxes on basis of previous year's income and slab rates.

Pankaj Batra5212

Thanks for reply. Also, if EPF is withdrawn after 5 years, is it necessary to show the amount in ITR?

prankur•

As such there won't be any need. But if you want it can be shown in non taxable incomes under EI sheet in ITR2.

Pankaj Batra•

I read you had mentioned in some other thread that interest component of EPF should be under income from other sources head. For tax calculations, is it simply adding to the income and then tax as per current tax brackets (10, 20, 30%) or there are some other tax rates for it (like capital gains)? Thanks

prankur•
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