PF is tax-free if an employee has been in service for 5 yrs or more








From a tax perspective, as per Section 10(12) read with Rule 8 of Part A of Fourth Schedule of the Income Tax Act, 1961, the accumulated PF balance due and payable to the employee is exempt from tax if he has rendered continuous service for a period of five years or more. Where there are multiple employers and the PF balances are transferred to the PF account with the most recent employer, the cumulative period of employment with all the employers is required to be seen for the purpose of evaluating whether the employee has rendered continuous service for a period of five years or more.

In the instant case, your PF balance was transferred between the two legal entities of Company A. Hence, the cumulative period in respect of your PF account with Company A is more than five years. However, your period of employment with Company B is less than five years. Hence, if the balance in Company A’s PF account is transferred to Company B’s PF account, the total cumulative period of contribution to the PF would also be more than five years.

Accordingly, post transfer of PF balance, the cumulative accumulated balance to the extent payable to you at the time of ceasing employment shall be exempt from tax.

However, in case you do not transfer your balance in Company A’s PF account to Company B’s PF account, then only the accumulated balance in Company A’s PF account to the extent payable to you at the time of ceasing employment shall be exempt from tax.

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