Income Tax for Premature Provident Fund withdrawal of more than Rs.30,000
The Government has announced that income tax will be imposed if, at the
time of premature withdrawal, the Provident Fund amount is in excess of
Rs.30,000.
Finance Minister brought a new provision in his budget that allows for
TDS on Provident Fund withdrawal before five years of continuous
service. When calculating the period of continuous service of five
years, the previous employment can also be included. The intention of
this at promoting long-term savings. The amendment will come into force
from June 2015.
“Taxes will be imposed if, at the time of closing or transferring the PF
account, the amount is in excess of Rs.30,000, and, if the employee has
been employed in the current job for less than five years. Tax rebates
are applicable. In order to claim tax exemption, the person has to
submit a copy of his/her PAN card and Forms 15G and 15H, accompanied by a
signed and filled up Form 19.
“Failing to do so will attract maximum taxes of up to 34.61%. If the
forms are submitted, only 10% taxes will be deducted. Taxes will not be
imposed if an old PF account is being converted to a new PF account. If
the employee has served for more than five years, then, at the time of
closing his account, no taxes will be imposed.
“The PF amount will also not be taxed if the employee is unwell, if the
company has closed down, if the employment contract comes to an end, or
if the employee loses employment for reasons that cannot be attributed
to him/her.”