I have been working for the past four years and making PF contributions for the last three years. I now have a new job offer and am planning to withdraw my PF balance. What will be the tax implications?

M Sitalakshmi, Chennai

Congratulations on the new job. However, for PF withdrawals to be deemed tax free, you need to have the balance maintained for a period of five years. If the duration of PF holdings is less than five continuous years, the withdrawal is taxable in the same financial year as per the PF Act. In your case, it will be better if you transfer the accumulated PF balance to your new employer, as doing so will mean the period of previous employment is also included as part of continuous service. Moreover, PF withdrawal can be as per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires you to have a non-employment period of two months after leaving your job. Based on the information you have shared, you will be better off without withdrawing the PF contributions, unless it is an emergency.