EPFO Withdrawal Tax: There are certain rules for withdrawing money from the Employees’ Provident Fund (EPF), such as retirement, unemployment, or an emergency. TDS is deducted on PF withdrawals, but exemptions are available in some cases. Withdrawals before 5 years are subject to TDS, but not on amounts less than ₹50,000. Transferring PF upon changing jobs may also be exempt from TDS.
Add informalnewz.com as a Preferred Source
EPFO Withdrawal Tax: The Employees’ Provident Fund (EPF) is a vital retirement savings scheme, but withdrawals are subject to certain rules. Employees can make full or partial withdrawals based on retirement, unemployment, or emergencies such as medical needs, marriage, or housing. Withdrawals from PF funds are taxable. However, the question is when and how much tax is applicable on PF withdrawals.
What are the rules regarding PF withdrawal?
- The entire EPF amount can be withdrawn upon retirement. The retirement age set by EPFO is 55 years.
- An employee can withdraw 90% of the EPF amount after attaining the age of 54, one year before retirement.
- An employee can withdraw 75% of the EPF amount after one month of unemployment. The remaining amount will be transferred to the PF account of the person with the new job.
- An employee can withdraw the entire EPF amount after two months of unemployment.
- EPF amount can be withdrawn even without the employer’s consent by obtaining online approval, if Aadhaar is linked to the UAN and the employer has approved it.
TDS is deducted on PF withdrawals.
If you’ve ever withdrawn money from your Provident Fund (PF) and noticed some amount missing, it’s likely due to TDS. When you withdraw money from your PF before completing five years of continuous service, a portion of it may be deducted as TDS.
TDS is a system by which the government collects taxes at the time of income generation. Simply put, when you earn income, such as salary, interest, rent, or payment for services, the person or company making the payment deducts a small portion of the tax before paying it to you.
Is PF withdrawal up to ₹50,000 tax-free?
If you withdraw from EPF before completing 5 years of continuous service, the withdrawal amount is taxable. However, if the amount is less than ₹50,000, no TDS will be deducted. Your tenure with the previous employer is also included in the calculation of 5 years of service. If you transfer your EPF balance from an old employer to a new employer and your total service period is 5 years or more, no TDS will be deducted. Remember, you must calculate the exact 5 years; any deductions will be invalid if you reduce the number by a few days.
You can check the TDS deducted on your Form 26AS and claim credit for it when you file your income tax return (ITR). If excess TDS was deducted on PF withdrawals, and your total income is below the taxable limit, you can claim a refund when you file your return.
