PF Withdrawal New Rules: While the new update may make it easier to withdraw PF funds, the tax on them will still be levied according to the old rules. The entire tax landscape depends on your length of service.
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EPFO 3.0: The Employees’ Provident Fund Organization (EPFO) will soon introduce EPFO 3.0. This is set to be a revolutionary change for PF subscribers. With this new update, you won’t have to wait weeks to withdraw money from your PF balance; instead, you’ll be able to withdraw cash directly using an ATM card.
How will the PF ATM work?
According to experts, EPFO 3.0 aims to give subscribers more control over their money:
Use like a debit card: The ATM card issued for PF can be used like a bank debit card.
Up to 75% withdrawal: In case of emergency such as medical need, house construction, or unemployment, you will be able to withdraw up to 75% of your total PF balance instantly.
Possible limit: While official confirmation is still pending, it is believed that a withdrawal of up to ₹1 to ₹2 lakh may be allowed at a time.
Convenience will increase, but tax rules will remain unchanged.
While the new update may make it easier to withdraw PF funds, the tax will remain levied according to the old rules. This all depends on your length of service:
After 5 years: If you have completed 5 years of continuous service (including PF transfers from previous companies), PF withdrawals will be completely tax-free.
Before 5 years: If you withdraw funds before completing 5 years of service, it will be added to your total income for that year and taxed according to your tax slab.
The complete math for withdrawals before 5 years
Suppose you withdraw ₹2 lakh after 3 years of employment, this will happen:
TDS Deduction: If you have provided your PAN, 10% TDS, or ₹20,000, will be deducted at the time of withdrawal. You will receive ₹1.8 lakh in cash.
Income Tax Slab: This ₹2 lakh will be added to your total income at the end of the year. If you fall in the 20% tax slab, your total tax will be ₹40,000. Since ₹20,000 has already been deducted, you will have to pay an additional ₹20,000.
Reversal of 80C Benefit: The tax exemption you availed under Section 80C during your employment will also be withdrawn.
The most important thing is that if you don’t submit your PAN card, the TDS rate can increase from 10% to 34.608%. Therefore, it’s crucial to provide your PAN and Form 15G/15H (if applicable) when withdrawing PF.
