PF withdrawal: Common questions pertaining to this case
Two common questions in the minds of people:
Q1.When can one withdraw his/her Provident Fund?
Q2. If one needs to pay income tax on the withdrawn amount?
The answers are here:
In case an individual withdraws accumulated balance from his/her recognized PF account without giving continuous services of minimum five years to the employer, income tax is required to be paid on the amount.
However, if one shifts his job (and transfers to the latest PF account with the new employer) then total number of years of continuous employment (earlier and the latest combined) is considered as part of unbroken service – which should at least add up to 5 years cumulatively. Under such a scenario, there are no income tax implications of the withdrawal of accumulated amount.
In such a case, the balance amount in the previous PF account is added to the latest maintained with the new employer. With the introduction of Unique Account Number (UAN), the struggle to shift account has ended and one only needs to submit his/her UAN with the new organization and further contribution automatically starts adding into it.
Further, you would be required to report the amount withdrawn from PF account in your personal income tax return form to be compliant from a disclosure perspective.
Nevertheless, one must ensure at least a cooling period of 2 years is maintained after leaving the job before you withdraw amount as per the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.