My provident fund (PF) account is greater than 5 years outdated and my contribution to the fund is lower than ₹2.5 lakh every year.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 niche of two years between two jobs, is the curiosity obtained within the PF account throughout that interval taxable?
— Title withheld on request
As per the provisions of the Earnings-tax (I-T) Act 1961, the gathered stability due and turning into payable to an worker taking part in a acknowledged provident fund is exempt within the palms of the worker to the extent supplied in rule 8 of Half A of the fourth schedule.
Additional, as per the Rule 8 of Half A of fourth schedule to the I-T Act, gathered stability due and turning 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 purpose 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 stability due and turning into payable is transferred to his particular person account in any acknowledged provident fund maintained by the brand new employer; or
(iv) if the whole stability standing to the credit score of the worker is transferred to his NPS (Nationwide Pension System) account
It’s to be famous that the time period “gathered stability resulting from an worker” means the stability (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 obtainable solely in respect of gathered stability (as on the final day of your earlier employment) which is transferred to the acknowledged provident fund account maintained underneath the brand new employer.
Any curiosity revenue obtained post-cessation of your earlier employment until switch to the provident fund account with the brand new employer could be thought of as taxable revenue. Therefore, for the hole of two years in employment, curiosity revenue shall be taxable in your palms.
Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.