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These plans areexcluded from tax on your federal return, but not onyour state income tax return. Once you retire and beginto receive pension benefits, you will pay federal tax onyour retirement payments, but you will not pay PA taxon those benefits.
As the total period of service is less than five years, withdrawal of accumulated PF balance shall be taxable in the financial year (FY) of withdrawal. Merely holding the PF balance for more than five years will not absolve the tax implications. The aggregate of employerâs contribution to PF and interest earned on it is taxable as salary. To the extent of the deduction claimed under section 80C on your contribution, it shall be taxed as salary. Also, the interest earned on your contribution shall be taxed as âincome from other sourcesâ.