Tax Talk: Why it doesn’t make sense to withdraw your PF amount at time of switching job

Feb 25 2014, 10:23 IST
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Retaining the amount in the PF account helps the fund grow with a compound effect. Reuters Retaining the amount in the PF account helps the fund grow with a compound effect. Reuters
SummaryA provident fund (PF) is a corpus to be maintained for retirement or emergencies.

account (even within five years of continuous service) is not considered taxable if the service of the employee has been terminated due to ill-health or discontinuance of employer’s business or due to any other reason beyond the control of the employee. It is pertinent to note that in terms of the provisions of the income-tax laws, if the PF amount is taxable, the payer is required to deduct income tax at the time of making the payment of the PF amount to the employee.

So, withdrawing the PF amount when one changes jobs has severe income-tax implications if the period of continuous service is less than five years.

Prakash Hegde

* The writer is senior manager, Tax and Regulatory Services, PwC India. Views expressed are personal

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