The Employee Provident Fund Organisation (EPFO) released an important notification last month regarding liabilities about the tax deducted at source (TDS) that all their members must know.
EPF is the government's retirement scheme to support an employed individual's future. That being said, any person who has invested in it can withdraw money after retirement at the age of 60 years, or even before it. However, in case a person wants to withdraw their money from the EPF account before retirement, there are a few important conditions and guidelines to follow to make the process hassle-free.
The provident fund has various tax rules for withdrawing money and a tax deducted at source (TDS) is applicable on withdrawing money before five years of service.
The government has announced a new rule on tax deductions, applicable from April 1. According to the revised guidelines, on an EPF deposit of more than ₹2.5 lakh, the interest will also be taxed. In the current financial year, employees who have an EPF account are getting an interest of 8.50 per cent on their deposits.
Here are some TDS liabilities on EPF you must know before withdrawing your money:
- If money is withdrawn from the EPF before five years of service, a TDS of 10 per cent is imposed on the amount, if it is more than ₹50,000. However, if he or she submits Form 15G/15H along with their PAN, no TDS will be imposed on the amount.
- At the same time, once an employee completes five years of service as a permanent employee, he or she will not be taxed on withdrawing money from their PF account.
- The term 'permanent employee' is of special importance here because if an employee joins on probation or contractual basis for a year and then serves as a permanent employee in a company for four years, the employer will deduct TDS on withdrawal from EPF.
- However, under certain special circumstances, such as if an employee has taken ill or if the company shuts down, money can be withdrawn from EPF before five years without any tax deductions.Apart from this, in case an employee has not submitted his or her PAN details, TDS is deducted at the maximum marginal rate of 34.606 per cent.
In case of further queries, EPFO members can login to the official website – epfindia.gov.in.