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I left my previous job in December 2021 (4.5 years after being in the job) and joined the new job in mid-February 2022. I will get my employees' provident fund (EPF) transferred to the new employer. I want to know will this gap of 1.5 months affect continuous service of 5 years? I might want to withdraw EPF in 2023 to buy a house. 

- Ankur Arora

The primary condition of five years of continuous service is mandatory to enjoy the exemption from the tax on the withdrawal. However, it is pertinent to note that while calculating five years of continuous service, the period served under the former employer/employers is also considered. Further, there are few exceptional circumstances where the withdrawal amount shall be exempt despite the condition of 5 years of continuous services, such as:

1. An employee has retired due to bad health.

2. Employment is terminated due to the discontinuation of business.

3. If, on the cessation from his employment, the employee gets work with the other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his account in any recognized fund maintained by such other employer (the PF authorities have now simplified the process of transferring).

In a scenario referred to in point 3, to calculate the period of continuous service of 5 years, the time spent with the previous employer shall also be counted. However, the gap in employment will not be considered to calculate the continuous period of 5 years since you have worked for 4.5 years and did not withdraw your accumulated balance lying in the PF account. After a gap of 1.5 months, you joined a new job and transferred your accumulated PF balance to your account in a recognized PF maintained by the new employer.

In this case, if you serve six months with the new employer, then you would fulfil the condition of rendition of service for a continuous period of 5 years. Hence, the gap in employment for 1.5 months will not be considered to calculate the continuous period of 5 years.

-Query answered by Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm. 

(Send your queries at mintmoney@livemint.com)

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