Income Tax Act, 1961
Sch. IV Part A Rule 8. EXCLUSION FROM TOTAL INCOME OF ACCUMULATED BALANCE.
The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be excluded from the computation of his total income – (i) If he has rendered continuous service with his employer for a period of five years or more, or
(ii) If, though he has not rendered such continuous service, the service has been terminated by reason of the employee’s ill health or by the contraction,
or discontinuance of the employer’s business or other cause beyond the control of the employee, or
(iii) If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognised provident fund maintained by such other employer.
Explanation : Where the accumulated balance due and becoming payable to an employee participating in a recognised provident fund maintained by his employer includes any amount transferred from his individual account in any other recognised provident fund or funds maintained by his former employer or employers, then, in computing the period of continuous service for the purposes of clause (i) or clause (ii) the period or periods for which such employee rendered continuous service under his former employer or employers shall be included.