The EPF that is for meeting your retirement needs if withdrawn because of some exigencies needs to be shown while filing ITR. The requirement is still a mandate when it is exempt in some of the cases.
Cases when the withdrawal from EPF corpus is tax exempt
1. When the withdrawal has been made after the employee completes 5 years in service.
2. When the withdrawal is made before five years of completing the service but for reason where the employer does not has control as in case of his or her sickness
3. The tax exemption is also there when the EPF amount is transferred to a new account on change of job or the like.
4. Also, the tax exemption in case of EPF withdrawal due to Covid 19 is applicable which allows withdrawal of up to 75% of EPF balance or 3 months' DA and Basic pay whichever is lower.
Experts in the tax domain recommend mentioning such details in the ITR. It needs to be specifically put in section where you need to specify tax exempt. This is a requirement under section 10(12).
In case the PF withdrawn is not tax exempt, how it is taxed?
This EPF amount withdrawn is completely taxable and any deduction allowed due to Section 80C is reversed. Of the sum withdrawn, also the employer's contribution shall be taxable as salary while the employee contribution and interest earned will be taxed as other income.
Further, in case one does not disclose such income stream, penalty shall be imposed for non-disclosure of taxable income.