Hello there, I have a question regarding how to treat the PF withdrawal amount shown in Form-16 as salary under sec17(1). Here is my case: 1. I moved from India to the US in Feb'15 and submitted for PF withdrawal. The PF was being withdrawn with under 5-years of service. 2. The PF withdrawal was processed in May'15 and an amount of ~5,00,000 was credited to my account. 3. In the Form16 that i received from my employer for the AY 2016-17, under 1 (a) salary under sec 17(1) Rs 2,99,085 and under section 7 Rs. 2319 (Interest on Member's contribution). I also have Rs. 1894 from savings account interest in the same AY. 4. In my ITR i've filled in: B1: Income from salary: 299085 B3: Income from other sources: 4213 (1894 of savings interest + 2319 form section 7 of form-16). B4: Total gross income: 303298. 5. I received a 139(9) intimation for defective return with a message "Your claim of TDS u/s 195 and 92A is not commensurate with income offered under Salary/ Other Sources." and the resolution reads "In relation to computing Income Chargeable under each head of Income, computation of Gross Total Income and Total Income corresponding to the TDS claimed in the return have to be dully filled in". My questions: 1. Is 299085 in 1(a) in my Form-16, the employers contribution? 2. Could you interpret the error description in 139(9) and sugggest what is wrong? Thanks.
Hi,
1. Yes, 299085 should be employers contribution plus interest thereon.
2. It seems that you have not shown employee contribution of past years in other income. Since, you are withdrawing pf before 5 years, your earlier claimed deduction will become taxable now.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
Forgot to mention that if any of the below conditions are satisfied then entire pf withdrawl will be exempt
Where the service period is less than five years, the reason for termination is discontinuance of employer’s business or ill health; or
The balance in RPF is reassigned to RPF with the new employer on re-employment.
Since your service period is less than 5 years, and you have withdrawn the PF, this will become taxable.
1. Yes. This would be the employer's contribution as increased by the interest. This will be taxable under the head Salaries.
2. This would require study of your 26AS and your return form.
Also, the remaining amount of PF received which was employer's contribution shall also be taxable under the head Other sources ( if deduction was claimed in the years of service)
We may help you to solve the issue.
CA Lakshita Bhandari
Hello,
It appears that while filing your returns you have not offered the refund of PF money to tax and hence this notice.
File a revised return and while doing so consider your salary as well as PF income. You may claim benefit of relief though if your eligible for the same.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Hi,
This might be because you would have only entered the figure of salary and not the proceeds of PF. While filing a revised return do enter both the figures taken together.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Please answer the following follow-up questions:
1. For all the past years where my PF contribution that was counted towards 80C exemption becomes taxable now, if i have home loan principal to show for 80c exemption for those years then would i still have to pay tax for my PF contribution during withdrawal?
2. I don't have any other salary through the AY apart from this PF credit of ~5,00,000.
a. So, will the whole of PF withdrawal credit(Employer Cont.+Employee Cont.+Interest) i received in my account be reported under the head salaries in my ITR?
b. Will I fall under 2,50,000 to 5,00,000 tax slab and subsequent tax rates?
3. What criteria would i use to check if i may claim the benefit of relief?
4. It seems like section 195 for TDS is for non-residents. Can you explain the statement "TDS u/s 195 and 92A is not commensurate with income offered under Salary/ Other Sources" in terms of TDS for non-residents and PF withdrawal?
1. In that case, it was already taxed in the past years, hence not taxable now.
2. Employer's contribution and interest thereon - Salary head
Employee's contribution and interest thereon - Other Sources head
3. There should be no relief in this case. The income shall be taxed.
4. This would require study of your 26AS and your return form.
Thanks for the responses. 1. After including the employer's contribution under salary and employee's contribution under other sources, my taxable income comes to ~5,00,000. Will I be taxable at 10% slab now? The original TDS when the PF amount was credited, was done at 30% which is the bracket i belonged to when i received indian salary in the previous years. LIke i said, in AY 2016-17 i had no other income apart from the PF withdrawal and so a) will i fall in 10% tax slab? b) As a result reduced tax, will i be eligible for a refund? 2. I can't find much about TDS under section 92A online, as in "TDS u/s 195 and 92A is not commensurate with income offered under Salary/ Other Source". Could you explain what 92A is or any pointer you can give?
1. The lower tax slab would be applicable and you shall be entitled to the refund.
2. 92A is TDS for Salary Income. There would be some mismatch in Form 26AS and return filed by you.
It is advisable that you get the return filed by a professional in order to avoid problems in future.
Hello,
Technically for the PF withdrawal you should be charged @ 30%. Since you were under that bracket and that what the benefit you have claimed in the earlier years which is to be reversed.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP