EPF is made mandatory for private employees where they are meant to invest 12% of their salary under this scheme, with the current rate of interest on the EPF account at 8.65%. But the biggest question one also has weather withdrawing EPF is taxable or non-taxable?
The Employee Provident Fund is like the social security scheme for individuals working in private companies. In other words, it is the method through which employees save up funds for retirement or when they leave the organisation.
Moreover, EPF is a backup plan which can be used at an hour of need. Under the retirement fund body Employees’ Provident Fund Organisation, the EPF is made mandatory for private employees where they are meant to invest 12% of their salary under this scheme, with the current rate of interest on the EPF account at 8.65%. But the biggest question one also has weather withdrawing EPF is taxable or non-taxable?
When it comes to claiming the EPF amount, One should also know that withdrawing EPF amount will attract any tax liability or not and if yes then in which case.
1. If the employee has rendered continuous service for a period of five years or more then the EPF withdrawal does not attract any tax liability.
2. Even if the employee has not rendered continuous service for five years.
EPF withdrawal is not taxable in certain cases where the services have been terminated due to employees’ ill health, contraction or discontinuance of the employer’s business or any other cause beyond the control of the employee.
3. After 36 months of the last active contribution in an EPF account, it gets categorised as dormant or inoperative account. That PF account continues to earn interest till the account holder reaches the retirement age. But it is to be noted that the interest earned after leaving the employment will be considered as taxable.
4. Income tax exemption is also allowed for one-time portability from a recognized provident fund to NPS. This had come into effect from the assessment year 2017-18.
One should also know that the withdrawal before five years of continuous service, tax deducted at source at 10% is levied.
If the amount is more than Rs 50,000, and period of service is less than five years, then it is suggested to submit form 15G/15H to avoid TDS for subscribers having no taxable income.
The withdrawal process can be on the account of marriage, education, purchase of property, home loan repayment, renovation or pre-retirement.