If an employee withdraws money from the appropriate EPF before five years have passed since the account was opened, Tax Deducted at Source (TDS) becomes applicable to the retirement-oriented investment instrument, Employee Provident Fund (EPF).
For salaried workers, there is a retirement fund called the Employees' Provident Fund (EPF). The employee contributes 12% of their monthly base pay to their EPF account, 12% of the employee's pay will also be contributed by the employer to the EPF. Individuals gain from contributions to EPF accounts through a deduction under Section 80C. Understanding how an EPF withdrawal might affect income tax or TDS would be beneficial.
Tax on withdrawing EPF:
Your EPF payout consists of three parts:
- Contribution from both you and the employee
- You/your employee's contribution is of interest
- Contributions from employers and interest in contributions from employers
Tax on EPF withdrawal:
TDS will be taken out if you leave the EPF before 5 years of nonstop service. However, when the sum is less than Rs. 50,000, no TDS would be taken into account.
Rates of TDS after 5 years:
If an EPF balance is withdrawn prior to five years of employment and the amount is greater than Rs. 50,000, TDS is charged at a rate of 10%. Whenever you withdraw money, don't forget to mention your PAN. TDS will be withheld at the highest slab rate of 30% if PAN is not provided. If the tax on your entire income, including the EPF withdrawal, is zero, you may file Form 15G/Form 15H. If Form 15G or Form 15H is submitted, TDS is not withheld.
