BackWhat to do if employer forces provident fund withdrawal?
You can complain to the regional provident fund commissioner
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My wife was worked for a company from February 2012 till January 2013. When she quit, her employer forced her to fill the provident fund (PF) withdrawal form and told her that unless she did so, they would withhold her full and final payment. She told them that she intended to transfer the PF account, but she still had to fill the withdrawal form. After joining the new company, my wife was going to fill the PF transfer form (three months since quitting the previous company), but to her surprise, the previous employer had already withdrawn the PF and sent her a cheque. What can we do?
—Vipul Kumar
You have a valid point. Your wife’s previous employer should not have forced her to withdraw the PF account on the pretext of holding back her full and final settlement. The company saying that it is only getting the form signed, and that your wife can transfer the PF with the new employer but subsequently withdrawing the PF was wrong.
As per the existing provisions, Employees’ Provident Fund (EPF) withdrawal is taxable if the withdrawal is made before rendering five years of continuous service. And continuous service does not mean you have to work with the same employer for a period of five years. You can change the employer in between, and there is no restriction on how many employers you change. But every time you shift, you need to transfer your PF account to get the continuous benefit.
In terms of tax implication, the tax can be divided into three parts. Contribution made by employer along with the interest earned on it will be clubbed under the head “salary". Contribution made by employee will be taxable to the extent where the tax benefit under section 80C (deductions) has been claimed. Interest earned by the employee on her contribution will become taxable as “income from other sources".
In your wife’s case, she also had the option to transfer the PF online. She could have even approached the PF office directly and the required form could have been attested by a gazetted officer along with a covering letter from the PF commissioner stating why she could not get the form singed by the employer.
But as this was not done, and the clause of continuous period has not been met, the withdrawal of PF, unfortunately, becomes taxable. At the same time, the PF money is entirely your wife’s and the employer cannot force her to withdraw the fund.
You can complain to the regional provident fund commissioner. Please send this complaint by registered post and keep a copy. After reasonable time, if no action is taken, you can also apply under the Right to Information and ask what action has been taken on your complaint, and why you should bear the burden of paying the taxes when you actually wanted to get the PF transferred.
Queries and views at mintmoney@livemint.com
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