When Provident Fund Withdrawal is Taxable?.

Provident fund (PF) withdrawal is taxable / exempt based on the type of employer and the type of provident fund.

Statutory provident fund:

 This fund is set up under the provisions of the Provident Fund Act, 1925. This fund is maintained by Government & Semi-Government organizations, local authorities, railways universities & recognized educational institutions.

Payment at retirement or termination of service is Fully Exempt

Recognized Provident Fund...

This fund is one which is recognized by the Commissioner of Income tax (I - T) in accordance with the rules contained there in the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952.

Payment at retirement or termination of service - Fully Exempt only under the below mentioned circumstances –

** The employee should have rendered continuous service with his employer for 5 (five) years or / more; or / if not so,

**  He should have been terminated due to ill health, due to discontinuation of employer’s business  or

** If he has found another employment, the balance due to him/her should have been transferred to his account in the recognized provident fund of the new employer.

Unrecognized Provident Fund..

 Unrecognized provident fund is the provident fund which is neither a statutory provident fund nor a recognized fund.

This scheme is started by an employer which is not approved by the Commissioner of Income Tax.

Payment at retirement or termination of service -  Employee’s own contribution is exempt but interest on his own contribution is taxable.

Payment received towards the employer’s contribution and interest thereon is taxable.

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