Tax on EFPO Withdrawal before 5 years. Contribution withdrawn in non contributing year

Income Tax 1961
1

I have gone through all the articles on Tax Q&A and found no specific answer to my question. So, adding a new topic.

Date Of Joining Company → July 2021
Date Of Leaving Company → Nov 2023
Date of PF Withdrawal → Aug 2024

No contribution to PF in FY 2024-25.

I have not claimed 80C in my previous years from PF. Employee contribution to PF in any year in this employment did not exceed 2 lakhs. Do I need to pay tax on the withdrawl amount in last year? In all the FY statements from EPFO, there is no amount in the Taxable column of the Passbook.

Thanks,
MK Abhi

2

Hey @mkabhi79

  • EPF withdrawal before 5 years of employment
    • Employer’s contribution: If you withdraw the amount from your EPF account before 5 years, the employer’s contribution becomes entirely taxable.
    • Employee’s contribution: This portion remains tax-free even if you withdraw funds from the EPF account before 5 years. But, if you had claimed a deduction u/s 80C against this, the amount gets added to your taxable salary.
    • Interest on both employer as well as employee contributions becomes taxable as ‘income from other source’.

Hope this helps!

3

EPF withdrawals before 5 years are taxable, including employee and employer contributions plus interest. Withdrawals during a non-contributing year are also added to your taxable income.

4

ok, thanks for sharing this information.

So, if the service is less than 5 years,

Employers Contribution + Employee Contribution of the total withdrawn amount → Added to “Income from Salary” - Section 17(1)

Interest earned at the time of withdrawal → Added to “Income from Other Sources”
Interest accumulated on Employer contribution → First Provisio to section 10(12)
Interest accumulated on Employee contribution → First Provisio to section 10(11)

Please let me know if above understanding is correct.