Withdrawal of provident fund money for those facing financial stress due to covid-19 is also allowed. An employee can withdraw 75% of the outstanding balance in the PF account or three months’ basic plus dearness allowance, whichever is lower, under this relief. In this connection, please take note the following main points:

In case you have withdrawn money from the employee's provident fund during FY2019-20, you will have to report while filing your income tax returns. “In case of recognized provident fund, the withdrawal is exempt if the employee has completed five years of continuous service. In case of less than five years, the withdrawal is tax-exempt if the employment is discontinued by reason of sickness or causes beyond the control of the employee or if the amount withdrawn has been transferred to a new account in case of re-employment,"

The government has also allowed withdrawal of provident fund money for those facing financial stress due to covid-19. An employee is allowed to withdraw 75% of the outstanding balance in the PF account or three months’ basic plus dearness allowance, whichever is lower, under this relief.

The withdrawal under covid relief is exempt from tax even if the employee has not completed 5 years of service as per the government guidelines.

In case you have withdrawn money from the provident fund before finishing five years of complete service, other than in the case of covid relief and under conditions where it is tax-exempt, not only the amount received becomes fully taxable but the income tax deduction if claimed under Section 80C will be reversed. Employee’s contribution to provident fund up to Rs.1.5 lakh is eligible for tax deduction under section 80C.

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