With some conditions on the PF account, you have the exemption that you can withdraw money even earlier, but you should know whether you will have to pay tax on EPF Withdrawal or not.
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The Provident Fund scheme run by EPFO is one of the biggest investment tools to build retirement corpus. Salaried employees have to deposit PF money from their salary, and in this along with the contribution of the employee, your money keeps on investing in this government scheme.
Technically this is your retirement fund, which you can completely withdraw after one age. However, with some conditions, you have the exemption that you can withdraw money from your PF account even earlier, but you should know whether you will have to pay tax on EPF withdrawal or not.
Let us know some such conditions where you have to pay tax on withdrawing money from EPF-
1. Withdraw money before 5 years
If you withdraw money from the PF account before the completion of five years of contribution, then you have to pay TDS on it. For this, you must be in service for 5 consecutive years. In this, both the new and old employers have a count regarding your tenure. If you transfer your EPF balance from the old employer to the new employer after completion of five years or more, then TDS is not deducted on your fund.
2. The job has been temporary in these five years
If you have been working on contract somewhere within five years, then your PF will not be credited, your employer does not have to contribute to your PF. But let’s say that after some time you become permanent in the job and your PF starts deducting. You leave this job after completing 5 years. And now if you have to transfer your EPF balance elsewhere, then it will be taxed because, out of the five years you have completed, you have spent some part of it in a temporary position.
3. Your fund is not recognized
A Provident Fund that has not received approval from the Commissioner of Income Tax is considered invalid for tax exemption. It may have been approved by the Provident Fund or any other institution, but you need approval from the Income Tax Commissioner to get the exemption on withdrawal after 5 years. If you are a member of URPF, then your withdrawal is taxed whether you have completed five years or not.
Understand taxability from the chart
| 1. Withdraw less than Rs.50,000 before completing 5 consecutive years in service | TDS will not be deducted, but if the person falls in the taxable bracket, then he will have to show the EPF withdrawal in his return of income. |
| 2. If you withdraw more than Rs 50,000 before completing 5 consecutive years in service | 10% TDS will be deducted on giving PAN. That too will not be deducted on submitting Form 15G/15H. |
| 3. If you withdraw from EPF after completing five years | TDS will not be deducted. He will also not have to show this withdrawal in the return of income. |
| If you want to transfer PF money from one account to another on change of job | TDS will not be deducted. It will not have to be shown in the return of income, as it is not taxable. |
| If you have to leave the job for some reason before completing five years in service / the reason for withdrawing money is outside your bus. | TDS will not be deducted. It will not have to be shown in the return of income, as it is not taxable. |
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