Money should be withdrawn from PF account only in emergency. There are also terms and conditions for this. If you withdraw money without following the terms and conditions, then you may have to pay tax on it. That’s why we are giving you all the information.
Employees have the option to withdraw money from their Provident Fund (PF) when needed. Many times people withdraw money from PF account. But there are some terms and conditions for this also. If money is withdrawn from the PF account prematurely and the rules are not followed, then tax may have to be paid. Therefore, it is important to know the rules related to PF. Know about the rules related to PF account.
to withdraw money from PF If it is necessary for you to withdraw money from PF account, then it should be done only after 5 years. If you withdraw more than Rs 50,000 before 5 years, 10% TDS has to be paid. That’s why it is important that you keep the money in PF for 5 years.
Why does it take TDS
to withdraw money from PF account before 5 years, the employer’s contribution comes under the income from salary category. At the same time, the contribution of the employee comes in income from other sources. The interest earned on these two is taxed. If someone’s income is less than Rs 2.5 lakh and he withdraws money from PF account, he should submit Form 15GH. TDS is not deducted on doing so.
Keep these things in mind
that tax is levied on withdrawing money from PF account before 5 years. 10% TDS is deducted on withdrawal of more than Rs 50,000. To avoid TDS, money should be withdrawn from PF account after 5 years. Interest is earned on the deposited amount.
When withdrawal of money is not taxed
, in some situations, tax is not levied on withdrawing money from PF account. If the employee has lost his job and he is withdrawing money, then there will be no tax. Withdrawal from PF account will not attract tax even in the event of company closure. After the death of the employee, there is no tax on withdrawing money from PF. At the same time, there is no tax on transfer of PF along with joining in a new company.
According to the rules of EPF, a member can withdraw
75 percent of the total amount deposited during the job after one month of job loss. At the same time, if the person remains unemployed for more than two months, then he can withdraw the entire amount from the PF account.
When to pay tax on
PF, there are four components of contribution in PF – the contribution of the employee, the amount deposited by the employer and the interest received on both. Of these four, three have to be taxed. This tax is levied on the contribution of the employee and the interest earned on them.
The calculation of tax on investment in PF also depends on whether the employee has availed deduction under section 80C of the Income Tax Act at the time of filing ITR or not. According to the Income Tax Act, if the employee deposits the amount in PF, then his contribution is exempted from income tax.