Personal Finance
The tax so deducted can be claimed as a credit while filing the return of income
Updated : Sep 13, 2018, 06:50 AM IST
The withdrawal amount of an account consists of the investment/principal portion and the interest earned on it. The taxability of the two differs based on the time of withdrawal. If the withdrawal is made before five years of continuous service, the entire contribution made by employer will be taxable and tax would be deducted if it exceeds Rs 50,000. The tax so deducted can be claimed as a credit while filing the return of income. Further, if deduction has been claimed under Section 80C while making such investment over the tenure of service, then the entire contribution will be taxed. Further, the interest earned on both the contributions shall be taxed under the head "Income from Other Sources".
If the withdrawal is made after five years of continuous service, the entire amount including the principal and interest would be tax-free.
Gift to a relative (including daughter) is not liable to tax. Further, in case of Minor, the income accruing in her hand shall be clubbed in the hands of her parents (whose total income is greater) and accordingly, the parent shall be liable to pay tax on the same.
The writer is Director, Nangia Advisors LLP
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