What is the taxation on withdrawal of PF?
—Vanita The Employee Provident Fund (EPF) Act and Scheme does not impose any restriction with regard to the timeline till which a member may keep EPF membership and thus remain invested in the Fund. However, an EPF account becomes inoperative, where an employee retires from service after attaining of 55 years of age and does not apply for withdrawal of accumulated balance within 36 months from the date it becomes payable.
Once an EPF account becomes inoperative, no interest is credited to that account from that date. It is assumed that you will retire from your organization after attaining 55 years of age and will not be employed with any other covered establishment.
In the absence of any specific restriction, the EPF account can be retained until the time you wish to retain membership. However, interest for cases where the employee retires after attaining 55 years of age is payable to the EPF account for next 3 years post the last month of EPF contributions.
As per the Income-tax (IT) Act, accumulated balance to the employee’s credit on the date of cessation of employment, is exempt from tax, if the employee has rendered continuous service with his employer (including previous employers if PF has been transferred) for a period of five years or more; or if such continuous service (being less than five years) was terminated due to ill health or contraction or discontinuance of employer’s business or any other cause beyond the control of the employee. Thus, the withdrawal of accumulated balance in your PF account shall not be taxable if you have rendered more than five years of continuous service and have contributed to the EPF for such period.
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