My friend was working in a company for 3+ years and applied for PF. Now she has received a letter from the company is pasted below.
Dear *****.
With ref. to your provident fund withdrawal form no.19 recd. by us, We would like to inform you that as your service is less than 5 years your provident fund company’s contribution will become taxable and your Income Tax liability is Rs.24781/- which will be deducted from your provident fund. Above subject, you are requested to refer Schedule IV part A of Income Tax Act 1961.
Balance of your PF accumulation is as under:
Employees Contribution- Rs. 56175/-
Company Contribution - Rs. 34542/-
Tax on the above amount- Rs. 24781/-
If you transfer your provident fund from Reliance Infocomm Ltd EPF to your present employer ( if employed ) then Income Tax liability will be Zero.
Please Note that if we do not receive reply in one month we will deduct the above mentioned tax amount and process your PF settlement.
Please confirm ASAP.
Is it taxable?
Kindly advice me.
From India, Bangalore
5Dear *****.
With ref. to your provident fund withdrawal form no.19 recd. by us, We would like to inform you that as your service is less than 5 years your provident fund company’s contribution will become taxable and your Income Tax liability is Rs.24781/- which will be deducted from your provident fund. Above subject, you are requested to refer Schedule IV part A of Income Tax Act 1961.
Balance of your PF accumulation is as under:
Employees Contribution- Rs. 56175/-
Company Contribution - Rs. 34542/-
Tax on the above amount- Rs. 24781/-
If you transfer your provident fund from Reliance Infocomm Ltd EPF to your present employer ( if employed ) then Income Tax liability will be Zero.
Please Note that if we do not receive reply in one month we will deduct the above mentioned tax amount and process your PF settlement.
Please confirm ASAP.
Is it taxable?
Kindly advice me.
From India, Bangalore
they are correct. and before deducting the taxable amount they have sent u the reminder which shows genuinity in their approach. in any case p.f. cannot be withdrawn till 5 years time whether u are working in the same company or have changed several companies thereafter. if u withdraw then it is taxable because it is long term investment (bhavishya nidhi)
i would suggest u to transfer the accumulated amount to the new p.f. account no alloted by your current company. by doing this first your pf will be exempted from IT and second your pensionable service will accrue.
From India, Dehra Dun
i would suggest u to transfer the accumulated amount to the new p.f. account no alloted by your current company. by doing this first your pf will be exempted from IT and second your pensionable service will accrue.
From India, Dehra Dun
What are the TDS. Provisions Applicable on Trusts?
TDS. on settlement of Provident Fund Trust:
As per the provisions of rule 8, 9 and 10 of The Part 'A' of the Fourth Schedule of the Income-Tax Act, 1961 in following cases no TDS. would be there in following cases (refer rule 8) :
i)
If employee has rendered continuous service with his employer for a period of five years or more, or
ii)
If, though he has not rendered such continuous service, the service has been termin- ated by reason of the employee's ill-health, or by the contraction or discontinuance of the employer's business or other cause beyond the control of the employee, or
iii)
If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognized provident fund maintained by such other employer, or
iv)
If, the accumulated balance due and becoming payable to an employee participating in a recognized fund maintained by his employer includes any amount transferred from his individual account in any other recognized provident fund or funds maintained by his former employer or employers, then in computing the period of continuous service for the purposes of clause i) or ii) given above the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall be included.
If the case of settlement falls in any of the above-mentioned categories, no T.D.S. would be there, otherwise T.D.S. would be calculated in the manner given below:
i)
Add the amount of employer's contribution, interest on employer's contribution and interest on employee's contribution for the relevant financial years to the other incomes of the employee;
ii)
Calculate the tax liability for all the years involved by applying the relevant slab for concerned financial year;
iii)
Calculate the difference between the tax liability before inclusion of amount given in i) above and tax liability calculated at ii) above;
iv)
Revert back the amount of rebate taken by employee on his own contribution under section 88. In this regard following criteria has to be followed :
a)
Amount of revert back would be lower of tax liability or eligible rebate under section 88 on employee's on contribution;
b)
In case employee have rebate under section 88 from investments other than EPF also in that case, if tax can be covered by investments other than EPF than in that case first of all we would set the amount of other investment and then if any tax liability is still pending then in that case EPF would be absorbed.
v)
Apply surcharge applicable for financial year in which settlement made on the amounts given at column no. iii). & iv). given above.
T.D.S. Provisions Applicable on Superannuation Trust:
As per the provisions of rule 6 of The Part 'A' of the Fourth Schedule of the Income-Tax Act, 1961, T.D.S. has to be calculated at the time of settlement except in the following cases:
i)
On the death of the beneficiary; or
ii)
To an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement;
Tax would be deducted at average rate of tax. Average rate of tax as per section 2(10) means the rate arrived at by dividing the amount of Income Tax for last three years by the income of those last three years. After calculating average of tax, it has to be applied over the amount of settlement with concerned financial year's surcharge.
On the above deductions of T.D.S. trust has to issue a certificate of deduction in form no. 16 up to 30th of April of the following financial year and an annual return in form no. 24 & 22 has to be filed up to 31st of May of the following financial in case of provident fund trust & superannuation trust respectively.
Regards,
Venkatesh.P
From India, Bangalore
TDS. on settlement of Provident Fund Trust:
As per the provisions of rule 8, 9 and 10 of The Part 'A' of the Fourth Schedule of the Income-Tax Act, 1961 in following cases no TDS. would be there in following cases (refer rule 8) :
i)
If employee has rendered continuous service with his employer for a period of five years or more, or
ii)
If, though he has not rendered such continuous service, the service has been termin- ated by reason of the employee's ill-health, or by the contraction or discontinuance of the employer's business or other cause beyond the control of the employee, or
iii)
If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognized provident fund maintained by such other employer, or
iv)
If, the accumulated balance due and becoming payable to an employee participating in a recognized fund maintained by his employer includes any amount transferred from his individual account in any other recognized provident fund or funds maintained by his former employer or employers, then in computing the period of continuous service for the purposes of clause i) or ii) given above the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall be included.
If the case of settlement falls in any of the above-mentioned categories, no T.D.S. would be there, otherwise T.D.S. would be calculated in the manner given below:
i)
Add the amount of employer's contribution, interest on employer's contribution and interest on employee's contribution for the relevant financial years to the other incomes of the employee;
ii)
Calculate the tax liability for all the years involved by applying the relevant slab for concerned financial year;
iii)
Calculate the difference between the tax liability before inclusion of amount given in i) above and tax liability calculated at ii) above;
iv)
Revert back the amount of rebate taken by employee on his own contribution under section 88. In this regard following criteria has to be followed :
a)
Amount of revert back would be lower of tax liability or eligible rebate under section 88 on employee's on contribution;
b)
In case employee have rebate under section 88 from investments other than EPF also in that case, if tax can be covered by investments other than EPF than in that case first of all we would set the amount of other investment and then if any tax liability is still pending then in that case EPF would be absorbed.
v)
Apply surcharge applicable for financial year in which settlement made on the amounts given at column no. iii). & iv). given above.
T.D.S. Provisions Applicable on Superannuation Trust:
As per the provisions of rule 6 of The Part 'A' of the Fourth Schedule of the Income-Tax Act, 1961, T.D.S. has to be calculated at the time of settlement except in the following cases:
i)
On the death of the beneficiary; or
ii)
To an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement;
Tax would be deducted at average rate of tax. Average rate of tax as per section 2(10) means the rate arrived at by dividing the amount of Income Tax for last three years by the income of those last three years. After calculating average of tax, it has to be applied over the amount of settlement with concerned financial year's surcharge.
On the above deductions of T.D.S. trust has to issue a certificate of deduction in form no. 16 up to 30th of April of the following financial year and an annual return in form no. 24 & 22 has to be filed up to 31st of May of the following financial in case of provident fund trust & superannuation trust respectively.
Regards,
Venkatesh.P
From India, Bangalore
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