Does withdrawal of accumulated balance in EPF attract taxes?


As per Section 10(12) read with Rule 8 of Part A of Fourth Schedule of the Income Tax Act, 1961 the balance in Employee Provident Fund Account on the last day of employment of the employee, that is the accumulated balance in the PF account remains non taxable if the continuous term of employment is 5 years or more.

Therefore this section states that if the employee withdraws the accumulated balance in the PF account after 5 years of continuous employment then it will be non taxable.

How will the provisions apply in the case of an employee who moves jobs before the completion of the mentioned duration?

Let us see with an simple example

  1. Mr.A is in employment at XYZ for 6 years. He quits the company in January but does not withdraw the EPF balance and joins PQR for 6 months. Then he moves to LMN in July.The UAN remains the same.
  2. In September he decides to withdraw the EPF balance to invest in property. The balance will be tax free in case he moves the balance from the oldest company (XYZ) to the newest (LMN) since the cumulative period is more than 5 years.
  3. Hence it is to be noted that where there are multiple PF balances the cumulative period of employment relating to all such accounts is considered.