Is PF Withdrawal Before 5 Years Taxable Under the New Act?

Yes, usually. If you take out your PF balance after less than five years of continuous service, the tax exemption on it is lost, and most of the money is taxed as if the fund had never been a recognised provident fund. The employer's share and its interest are taxed as salary, interest on your own share as income from other sources, and your own contributions only to the extent you claimed a deduction for them.

There are exceptions, and the five years can include earlier jobs. Both are explained below, with a worked example.

Which law applies to your withdrawal

The tax year is set by the date the money is paid, not the date you left the job.

• Paid on or before 31 March 2026: the Income-tax Act, 1961 applies (AY 2026-27). The rules are in section 10(12) and Part A of the Fourth Schedule, and TDS is under section 192A.
• Paid on or after 1 April 2026: the Income-tax Act, 2025 applies (Tax Year 2026-27). The rules for recognised provident funds are now in Schedule XI of the 2025 Act. Budget 2026-27 amended Schedule XI to align it with EPF law. Those changes were about recognising private PF trusts, their investments and the cap on employer contributions, and did not touch the five-year condition.

The five-year test and the exceptions below are in paragraph 8 of Part A of Schedule XI, and paragraph 9 says how the tax is worked out when they don't apply. They restate the old Fourth Schedule rules, and none of the Budget 2026-27 amendments listed in the Finance Bill memorandum touch them.

The five-year test

The withdrawal is exempt if you have rendered five years or more of continuous service when the balance becomes payable. Months, not calendar years, are what count: 60 months.

Earlier jobs count if the PF moved with you. EPFO's own FAQ says service with the previous and present employers is added together to arrive at total service. This works only when the old balance was transferred into the current account. If you withdrew the PF from an earlier job instead of transferring it, that period is gone. So the first thing to do before a final withdrawal is to transfer every old member ID. See PF transfer on a job change and two UANs and old PF accounts.

Exceptions even under five years

The withdrawal stays exempt, even before five years, if:

1. your service ended because of ill health,
2. it ended because the employer's business was discontinued or contracted,
3. it ended for another reason beyond your control, or
4. the balance is transferred to a recognised provident fund with a new employer, or in full to your account under the notified pension scheme (NPS) referred to in section 124 of the 2025 Act (section 80CCD of the old Act).

A resignation to join another company, take a break or start a business is none of these. It is the common taxable case.

What gets taxed, and under which head

When the exemption is lost, the balance is split into four parts:

If you were in the new regime all along, you never claimed 80C on your PF contributions, so your own contributions come back tax-free. Only the employer's share, its interest and the interest on your share are taxed.

If you are an EPS member, the pension part (8.33% of the employer's contribution that goes to EPS) is separate from the PF balance. Its withdrawal benefit follows the Employees' Pension Scheme rules. See EPS withdrawal now has a 36-month wait.

Worked example

Meera joined a company in April 2023 on a basic salary of ₹40,000 a month and resigned in March 2026 after 36 months. She doesn't join another PF-covered job. Under the EPF Scheme, 2026 she can withdraw her full PF balance only after 12 months without covered work, so the money is paid in 2027. Whether that falls in Tax Year 2026-27 or 2027-28, it is a 2025 Act case. She was in the new tax regime for all three years.

Monthly contributions: ₹4,800 from her (12%) and ₹4,800 from the employer, both on her full basic pay. Because her pay was above the ₹15,000 wage ceiling when she joined, she was not eligible for EPS, so all of the employer's 12% went to her PF.

The interest figures are rough estimates at 8.25% a year on a growing balance, including the 12-month wait. Use the actual split from your passbook.

How it is taxed:

At a marginal rate of 20% plus 4% cess, ₹2,48,800 costs about ₹51,750 in tax. Had Meera been in the old regime and claimed 80C on her ₹1,72,800, that amount would be taxed too.

Had Meera stayed two more years, or transferred her balance to a new employer and crossed 60 months there, none of this would be taxable.

TDS on the withdrawal

EPFO deducts TDS when it pays out a balance that is not exempt. Under the 1961 Act this was section 192A:

• no TDS if the payment is below ₹50,000,
• no TDS if service is five years or more (EPFO counts transferred service), or if the balance is being transferred,
• 10% if your PAN is on record with EPFO, and a higher rate if it isn't,
• no TDS if you give a valid self-declaration that your total income is below the taxable limit.

For payments from 1 April 2026 the same TDS sits in section 392(7) of the 2025 Act: 10% where the payment is ₹50,000 or more and the balance is taxable because paragraph 8 of Part A of Schedule XI doesn't apply. The 2026 Rules replaced Form 15G and 15H with Form 121 for the self-declaration, and Form 121 lists the payment of accumulated PF balance among the incomes it covers. See Form 121 replaces Form 15G and 15H. The higher rate without a PAN still applies, so keep your PAN on your UAN.

TDS is not the final tax. Whatever EPFO deducts, the tax actually due on the taxable parts at your slab is worked out in your return, and the TDS is credited against it.

Where it shows and how to report it

• The TDS appears in Form 26AS and AIS against EPFO as deductor. Under the old Act, Form 26AS listed it as section 192A, payment of accumulated balance due to an employee. The AIS shows the TDS, but it does not split the amount into salary and other income for you.
• In the return, put the taxable parts under the right heads: employer share and its interest under salary, interest on your share under other sources. Add any reversed 80C deduction. Claim the TDS.
• The law works out the tax as if the fund had never been recognised for the years of service, so a CA can tell you whether spreading it over those years changes the figure for you.

To read the TDS entries, see AIS vs TIS vs Form 26AS.

If you file for yourself or family, myutils.me shows each PAN's AIS and TDS entries, including a TDS line from EPFO, once you add the PAN or press Sync. It is an independent app, not affiliated with the Income Tax Department.

FAQ

Is PF withdrawal after 5 years taxable?

No. After five years of continuous service, counting earlier jobs whose PF was transferred into the current account, the withdrawal is exempt and EPFO deducts no TDS.

I worked 3 years at one company and 3 at another. Is my withdrawal taxable?

Not if the first company's PF was transferred into the second account. Together that is six years. If you withdrew the first balance instead, only the second stint counts.

Is the whole PF balance taxable if I withdraw early?

No. Your own contributions are taxed only to the extent you claimed a deduction for them. The employer's share, its interest and the interest on your share are taxed.

Does the new Income-tax Act change the five-year rule?

No. The 2025 Act moved the recognised provident fund rules to Schedule XI, where the five-year condition is paragraph 8 of Part A. Budget 2026-27 changed other parts of that schedule, not this condition.

Can I avoid TDS on an early PF withdrawal?

Only if the payment is below the threshold, an exception applies, or you give a valid self-declaration (Form 121 from Tax Year 2026-27). Keep your PAN updated with EPFO, or the deduction is at a higher rate.

Sources

• Income-tax Act, 2025, as amended by the Finance Act, 2026: section 392(7) and Schedule XI, Part A, paragraphs 8 and 9
• Income-tax Rules, 2026: rule 211 and Form No. 121, notified 20 March 2026
• Memorandum to the Finance Bill, 2026: rationalisation of Schedule XI relating to provident funds
• PIB, 3 February 2026: EPFO welcomes rationalisation of the income-tax regime for provident funds (Schedule XI, Income-tax Act 2025)
• EPFO FAQs: TDS and counting service across employers
• Gazette of India: Employees' Provident Fund Scheme, 2026, G.S.R. 525(E) (paragraph 49, final withdrawal)