Income tax on PF withdrawal before 5 years

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

asked Mar 28 '12 at 12:12 by prankur 1111


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80C deduction would also be reversed in case amount is withdrawn before five years.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.

answered Mar 28 '12 at 15:40 by Pankaj Batra 5.2k320

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Thanks for reply. Also, if EPF is withdrawn after 5 years, is it necessary to show the amount in ITR?
(Mar 28 '12 at 16:54) 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.
(Mar 28 '12 at 16:56) 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
(Mar 29 '12 at 12:38) prankur
There are no other tax rates for income from other sources. It is taxed like income from salaries. You would need to add EPF interest to income from other sources and employer/employee contribution into income from salaries.
(Mar 29 '12 at 14:17) Pankaj Batra
i think have asked lots of questions. probably last one on this thread and I should have all my doubts clear. EPF has two parts. One if PF and other is Pension fund. So, pension fund would also be given same treatment as employer contirbution?
(Mar 29 '12 at 15:02) prankur
Pension fund is deducted only from employer contribution, so it would have same tax treatment as that of employer contribution in pension fund.
(Mar 30 '12 at 19:31) Pankaj Batra
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Asked: Mar 28 '12 at 12:12

Seen: 4,884 times

Last updated: Mar 30 '12 at 19:31