Provident Fund withdrawal is taxable if it is done without rendering continuous service for 5 years

Q: I am Savita. Five years ago, my husband has purchased a house in my name. We are going to sell it.I would like to know upon whom the tax liability arise. I am a home maker and I don’t have any other income.

~Savita Balachandran, Kochi

A: Mrs. Savita, since the house was purchased in your name, you are the owner of the house. At the time of selling the house, you will become liable paying capital gains tax towards the gain you received. Since the house was a gift from your husband, clubbing provisions are also relevant here. Any ransfer of asset to spouse without adequate consideration attracts clubbing provisions. Accordingly, the gain earned by you towards the sale of the above house is taxable in the hands of your husband.

Q: I am a Bank employee. I want to invest my savings in some good schemes. What are the areas in which I can assure good returns without suffering much tax burden?

~Vishal Pathak, Patna

A: Vishal, there are various schemes to invest your money through which you can earn money without paying much tax. Since you are a bank employee, you will definitely have a Provident Fund Account in your name. PF is a very effective scheme for savings.You can raise the amount of premium if you want so. Out of that there are umpteen numder of schemes like Public Provident Scheme (PPF), Gold Monetization Scheme, Mutual Funds, Dividents, Insurance Policy Schemes etc. In all these schemes, you can enjoy a lot of tax benefits.

Q: My wife is working in a Software Company. She has a Provident Fund Account for 4 years. She is going to resign from her job and want to withdraw her PF account. What is her tax liability?

~Arvind Sachdev, Pune

A: Hi Arvind, first of all you should be aware that PF withdrawal is taxable if it is done without rendering continuous service for five years. However, if your wife is entering into a new job, she can transfer the accumulated PF balance maintained with the old employer to the PF account of the current employer. In such a case, the period of the previous employment will be considered as part of continuous service for calculating the period of five years.

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