I am planning to withdraw my Provident Fund balance before completing 5 years of continuous service. Will this withdrawal be taxable, and how should I show it in my Income Tax Return?
withdrawing your Provident Fund before 5 years, it usually means there’s either a job change, relocation, or some financial need behind it. Here’s how it plays out in tax terms:
Taxability of PF withdrawal before 5 years :
Yes, it becomes taxable. If you withdraw your PF balance before completing 5 years of continuous service, the tax benefits you enjoyed earlier are reversed.
The employer’s contribution and the interest earned on it are added to your salary income.
The employee’s contribution (your own part) is not taxed again, but the interest earned on your own contribution is taxable under “Income from Other Sources.”
If you had claimed deductions under section 80C for your PF contribution in earlier years, those amounts also get added back to your income in the year of withdrawal.
How to show it in ITR:
• The taxable portions need to be disclosed in the respective heads—mostly under Income from Salary and Other Sources.
• If tax was deducted at source (TDS) by the EPFO on your withdrawal (usually 10% if PAN is given), you can see it in your Form 26AS or AIS and claim credit while filing your return.
Exceptions:
• If you left your job due to ill health, or the company closed down, or reasons beyond your control, the withdrawal may not be taxable even if service was less than 5 years.