"Yes, your friend is right. PF withdrawn in five years of employment is taxable.
There are five cases when PF withdrew with in five years is not taxed.
1. If an employee retires at the age of 58 years and then he withdraws.
2. The employer terminates the employee because he has stopped doing business.
3. If because of employee's ill health, the employer terminates the employee.
4. If the employee withdraws PF only to transfer the balance from one PF account to another PF account.
5. If the employer terminates employment for any reason, not in the hands of the employee"
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