I have been contributing to my Provident Fund for a few years, but now I might need to withdraw it before completing 5 years of continuous service. I am confused whether such a PF withdrawal will be taxable and how I should report it in my Income Tax Return. Can you please guide me?
If you withdraw your Provident Fund (PF) before completing 5 years of continuous service, the withdrawal amount becomes taxable (except in certain cases like termination due to ill health, employer closing business, or reasons beyond your control).
1. Taxability of PF Withdrawal Before 5 Years:
The employer’s contribution and the interest earned on it are taxable as “Income from Salary.”
Your own contribution (employee’s share) is not taxed again, but the interest earned on it is taxable under “Income from Other Sources.”
If you claimed deductions under Section 80C for your PF contributions in earlier years, those deductions are also reversed and added back to your taxable income in the year of withdrawal.
2. TDS Deduction:
If your PF withdrawal amount is more than ₹50,000, then TDS at 10% is deducted (if PAN is provided).
If PAN is not linked or provided, TDS may be deducted at a higher rate.
3. Reporting in ITR:
You need to show the taxable portion of PF withdrawal under the respective heads (Salary/Other Sources) in your Income Tax Return.
If TDS is already deducted, you can claim credit for it in your ITR.
• In short, PF withdrawals before 5 years are taxable, and you must report them correctly in your ITR to avoid notices later.
For more details, you can visit the official Income Tax Department of India website: