My provident fund (PF) account is greater than 5 years outdated and my contribution to the fund is lower than ₹2.5 lakh every year. If I’ve a spot of two years between two jobs, is the curiosity acquired within the PF account throughout that interval taxable?
— Name withheld on request
As per the provisions of the Income-tax (I-T) Act 1961, the gathered steadiness due and changing into payable to an worker collaborating in a acknowledged provident fund is exempt within the arms of the worker to the extent supplied in rule 8 of Part A of the fourth schedule.
Further, as per the Rule 8 of Part A of fourth schedule to the I-T Act, gathered steadiness due and changing into payable from a acknowledged provident fund shall be excluded from the computation of complete revenue of worker— (i) if he has rendered steady service along with his employer for a interval of 5 years or extra, or
(ii) if the service has been terminated by motive of worker’s ill-health, or by contraction or discontinuance of the employer’s enterprise or different trigger past the management of the worker, or
(iii) if, on the cessation of employment, the worker obtains employment with another employer, to the extent the gathered steadiness due and changing into payable is transferred to his particular person account in any acknowledged provident fund maintained by the brand new employer; or
(iv) if your entire steadiness standing to the credit score of the worker is transferred to his NPS (National Pension System) account
It is to be famous that the time period “gathered steadiness resulting from an worker” means the steadiness (together with accretions thereon) standing to the credit score of an worker on the day of cessation of his employment. In such a case, the exemption is offered solely in respect of gathered steadiness (as on the final day of your earlier employment) which is transferred to the acknowledged provident fund account maintained below the brand new employer.
Any curiosity revenue acquired post-cessation of your earlier employment until switch to the provident fund account with the brand new employer can be thought of as taxable revenue. Hence, for the hole of two years in employment, curiosity revenue shall be taxable in your arms.
Parizad Sirwalla is accomplice and head, world mobility companies, tax, KPMG in India.
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