Tax on PF Withdrawal: How to Calculate TDS on EPF Withdrawal

Tax on PF Withdrawal

Tax on PF Withdrawal

Since employee provident fund is a retirement saving scheme, no tax or nominal tax is applicable on PF. The government had proposed to levy a tax on PF withdrawal and PF contributions. Recently in May 2016, the government had to roll back the decision to tax 100% PF withdrawal. Due to the strong backlash raised by salaried tax payers, the proposal to tax full PF withdrawal is now turned down. The government also withdrew the proposal to restrict the tax-free contribution by an employer up to Rs. 1.5 lakh per annul.

We shared here major tax deduction and exemption rules on EPF withdrawal. Rules and regulations for tax on PF withdrawal are discussed in this post in details. Know when and at what rate your PF withdrawal is taxation. Check the latest rules for TDS on EPF and rules for PF withdrawal tax. Here we have discussed the tax applied at the time of withdrawal of the PF amount.

Right from the beginning, the EPF retirement saving scheme is general a tax-free saving scheme. Discover all the up to the date EPF tax rules and interest rates on PF. The rates and PF rules are subject to change over a period of time. Till now, the PF withdrawal after 5 years of a job was entirely free of tax. In February 2016 budget, the government proposed to tax 60% of the employee contribution. Fortunately, the proposal was withdrawn due to strong protest by the salaried class and unions. Since NPS is taxable, it was a move to bring EPF scheme at par with NPS in terms of tax. However, as we stated earlier, there is no tax on EPF withdrawal after completion of 5 years at the job. But in certain conditions tax is applicable on PF. Go through the tax rules with regard to EPF in details.

Tax Exemptions on PF Withdrawal

Find below the conditions in which the tax is applicable on withdrawal of provident fund:

  1. PF amount withdrawn before 5 years of service is taxable.
  2. When the amount of PF withdrawal is above Rs. 30,000/-

Both the above conditions should be present simultaneously. Otherwise, your PF withdrawal is not taxable. This means if you are withdrawing less than Rs. 30,000/- even before completion of five years, your withdrawal is not taxed.

After 5 years, there is no tax on PF withdrawal whether the amount is under or above Rs. 30,000/-. Five years is the minimum lock period for applying a tax on EPF withdrawal.

TDS Calculation on PF Withdrawal

We have given below the criteria on the basis of which your PF withdrawal amount is taxed in the case if it is occurring before 5 years of your service.

tax on PF withdrawal

No TDS on PF withdrawal  (before 5 years of service) in following conditions:

  1. If the PF amount is transferred from one account to another account and not withdrawn. So when you change your job and get the PF amount transferred, there will not be any TDS applicable.
  2. If you withdraw your PF due to any of the below condition, there will be zero TDS:
  • Terminated from service due to medical reasons or
  • Company is closed down by the employer or
  • Due to completion of the project or
  • Any other conditions which are practically out of employee’s control.
  1. If PF amount is below Rs. 30,000/-
  2. If the PF amount is Rs. 30,000 or more but the employee is submitting Form 15G/15H and PAN card number.

TDS Deduction on PF withdrawal before 5 years of service:

  1. Tax on PF withdrawal is charged @ 10% if only PAN is submitted and no 15G/15H is given. This tax is levied provided that the amount claimed for withdrawal is equal to or above Rs. 30,000/-.
  2. The tax is charged at the rate of 34.608 if the PAN is not submitted.

Who is Exempted from Tax on PF Withdrawal

Senior citizens (above 60 years) can avoid tax on PF withdrawal by submitting the form 15H. People without any taxable income can avoid this tax by submitting form 15G. However, it is compulsory to submit PAN number with the form 15G and form 15H. Employees can avoid tax on their provident fund by transferring the amount while changing jobs.

EPF withdrawal also attracts many tax benefits. Your employer’s contribution and interest on it are exempted from the tax. The employee’s contribution is also exempted. Interest on the employee’s part is also exempted from tax. EPFO has taken many initiatives in recent years to reduce employee’s dependency for PF withdrawal. Employees can now view their PF balance and EPF claim status. Do refer to other PF rules and information published on our blog. EPF is the major retirement saving scheme for the salaried class in India. Millions of state and central government are benefitting from the online services of EPFO portal.Hence, we have attempted to provide all the information related to EPF to the users. Send your queries related to tax on PF withdrawal and other EPF matters.

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