Provident fund - tax deduction
veeramani
(Querist) 21 October 2014
This query is : Resolved
My friend joined a company on 6th Sep 2009 and he resigned and got relieved on 1st sep 2014. His employer has deducted 30% from his provident fund as tax (employee contribution). My friend says that since he has just 5 days to complete 5 years, the 4 year and 361 days should be rounded off to 5 years and no tax to be deducted. But employer is not accepting this.
Please clarify whether tax deducted is correct or not.
Devajyoti Barman
(Expert) 22 October 2014
ASK HIM TO LODE COMPLAINT WITH PF COMMISSIONER.
T. Kalaiselvan, Advocate
(Expert) 23 October 2014
The details are insufficient to render more precise opinion or advise, however, a complaint may be lodged as advised.
Anirudh
(Expert) 23 October 2014
As per Section 10(12) of the Income Tax Act, the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, will not form part of his Total Income, to the extent provided in Rule 8 of part A of the Fourth Schedule.
The relevant Rule 8 provides as under:
"The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be excluded from the computation of his total income -
(i) if he has rendered continuous service with his employer for a period of FIVE YEARS or more, or
(ii) if, though he has no rendered such continuous service, the service has been terminated 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 recognised provident fund maintained by such other employer.
In the instant case, obviously, the person has not completed FIVE YEARS continuous service. Because of this, the accumulated balance will form part of his total income at the time of computation. In view of this, the employer is obliged to deduct Tax at Source.
Wherever the legislature has intended to extend the benefit to count the part of the period as full period, it has specifically done so. In this case, there is no such intention to ignore the shortage. The taxing statute has to be interpreted very strictly. Therefore in this case, the TDS cannot be avoided, unless para (iii) of the Rule 8 is applicable.
Having given my views, I must also add that from this LCI Forum, you will get prompt advice to GET IN TOUCH WITH A TAX CONSULTANT/TAX EXPERT. (Please do so, and do not believe my views, even if it is technically and legally correct.)
H.M.Patnaik
(Expert) 23 October 2014
Expert Mr. Anirudh has thrown better light on the issue of applicability of TDS on accumulated balance in PF on final withdrawal before completion of the ceiling period.The matter may be discussed with relevant documents with any local Income tax consultant for resolving doubts.
Kumar Doab
(Expert) 25 October 2014
Visit APFC in the nearest PF office and express your desire to keep your PF a/c regular and how to deposit the funds back.
They may suggest you the way out and help.
