Have you been religiously putting a hoard of your money in EPF? Ever wondered about withdrawing money from the EPF? Though the process of withdrawing money from your EPF may seem tedious, it in fact is transparent.
Instances of being taxed on an EPF is done on a case to case basis. Your worries should not be on the tax but on the wholesome returns from your EPF.
What is TDS?
TDS is an income tax collection source formulated under the Indian Income Tax Act of 1961. Tax Deducted at Source or in short TDS is collected by the Income Tax Department of India. Collection of TDS comes under the purview of the Central Board for Direct Taxes and Department of Revenue. TDS basically involves deduction of income at a prescribed percentage.
Importance of TDS
Under this Act, every citizen is responsible for making a determined payment such as commission, professional fees, salary etc., and is held accountable to deduct at source a defined amount of tax before making payments in full to its receiver. This deducted amount will be credited to the kitty of the Government and is ultimately used for several Government developmental projects.
Employee Provident Fund also known as EPF was structured to give a sizeable amount of retirement benefit to the employee. As per the EPF terms and conditions, an employee contributes a nominal amount,which is deducted from the salary of the employee towards this fund.
EPF is a very beneficial scheme of the Government of India. Some of these benefits include:
How to Avail of EPF
EPF benefits are only available to EPF members or members of the provident fund. An easy way to become a member is to join an establishment. Your date of joining is in itself your first day of membership. However, EPF is available to only those establishments who have more than 20 or more odd employees.
EPF is not applicable in the state of Jammu and Kashmir.
As per the Budget of 2016-17 and the Finance Act, 2016 the threshold of Provident Fund withdrawals was raised from 30,000 to Rs. 50,000 for Tax Deducted at Source amended under section 192A of Income Tax Act, 1961. TDS is applicable on withdrawals wherein the accumulated balance is more than 50,000 and the Employee has worked for less than five years.
This new amendment is a discouragement for premature withdrawals from Provident Funds and a leap towards promoting long-term savings. These long-term savings ultimately mean more money for you at the end of your work term.
As per the provisions of the TDS Act, the rate of deduction is 10 percent on the submission of the Permanent Account Number (PAN).
According to TDS on EPF balance withdrawal New Rules/Guidelines:
TDS on EPF Withdrawals Before a 5 Year Term
In case of EPF withdrawals before 5 years of service:
It is pertinent to note that if you withdraw your EPF balance before the expiry of your five years of continuous service, it is taxable in the year in which the withdrawal has happened. Additionally, your employer’s contributions along with the accumulated interest amount will be also be due as “profits in lieu of salary”. Accumulated Interest on your employee contributions will be taxed under the heading “Income from other sources”. The tax deductions claimed on your contributions will be invalidated and shall be liable to tax.
Quick Look on the Working of TDS in case of Service less than 5 years
Remember TDS is not applicable on EPF withdrawal after 5 years of service. If you’re withdrawing your EPF before the completion of the fifth year than you need to do the following given below:
Submission of PAN |
Non-Submission of PAN |
Non-Applicability of TDS |
If you submit your PAN with Form 15G/15H then TDS is applicable. |
If you do not submit your PAN then TDS of 34% is applicable. |
A/c transfer of PF |
If you submit your PAN without Form 15G/15H then TDS of 10% is applicable. |
|
Services are terminated beyond the control of the Employee. |
Points to Remember
Forms Required for EPF Withdrawal
Form 19 is also known as the EPF withdrawal form. It is necessary to quote your Permanent Account Number for all claim transactions.
Two forms namely 15G/15H are required to be filed to declare that the employeesincome would not be taxable after receiving the payment of their EPF accumulations from the retirement fund body.
This form can also be submitted by you in case of tax on your total income including when the EPF balance withdrawn is nil.Remember Self declaration Forms 15G and 15H are to be submitted in duplicate.Forms 15G and 15H are not acceptable in cases where the amount of withdrawals is over 2, 50,000 or 3, 00,000 respectively.
At the End
EPF is a lucrative and beneficial scheme that promotes financial benefit. The EPF Member has the benefit of exemption from TDS with no taxable income only when he or she has submitted all the required duly filled forms along with Permanent Account Number.TDS is deductible at the time of payment of EPF under Section 192A of the Income Tax Act, 1961.