The amounts withdrawn from EPF will be treated as "salary", but tax payable is not same as other forms of income
Last year I withdrew all my PF balance when I was switching a job which was about Rs 5 lakh on which 10 per cent TDS was deducted under section 192A. I had withdrawn the EPF before completion of 5 years. Am I liable for more tax and under what head should I account for this money when filing my returns?
Neeraj Garg, Mumbai
It would have been better if you had transferred your PF when you switched your job. The amounts withdrawn from the EPF will be treated as "salary", but the tax payable on it is not as simple as would be in case of other forms of income. It is calculated as per Rule 9 of Part A of the forth Schedule to the Income Tax Act.
As the period of holding the money in the PF was less than five years, the contributions made by your former employer will also be treated as taxable salary in those years and if you had claimed any deduction under section 80C in respect of your own contribution to the EPF, those will be reversed for each of those years in which it was claimed.
Moreover, the interest accrued on the full EPF will be treated as income of each year. All the past year's assessment will be re-worked on the above basis and the additional tax payable will be found out by the assessing officer and charged in this year. Please make full disclosure as required in the I-T form applicable to you.