I recently quit my job and am currently unemployed. I worked with my previous employer for two years and am planning to withdraw the provident fund balance. How will this be taxed?
Roopak Asthana, Noida
It is unfortunate that you do not have a job at the moment. Such moments are very tempting to dig into one’s provident fund balance. To understand better, you should know that withdrawal from PF is taxable as you have not rendered continuous service of five years before tendering your resignation. In case you do withdraw the sum now from your PF balance, the money will be taxed, including the employer’s contribution and the interest which was not taxed earlier when the contributions were made and on which you claimed the tax deduction. Basically, the tax deduction you claimed as contribution towards your contribution to the PF as well. Moreover, the sum that you have redeemed now, will be added to your income and taxed accordingly this year. It will be in your interest to continue your PF contributions to your next job than make this withdrawal. This way you will not be subjected to any tax related liabilities.
