Provident Fund withdrawal new rule: Budget 2023 lowers TDS rate of EPF withdrawals in non-PAN cases

Finance Minister Nirmala Sitharaman disclosed a decrease in the Tax Deducted at Source (TDS) rate on Employees' Provident Fund (EPF) withdrawals for non-PAN instances when presenting the Union Budget 2023. The government has now lowered the TDS rate on the taxable share of EPF withdrawals in non-PAN cases from 30% to 20%.

This decrease in the amount of tax deducted from EPF withdrawals is anticipated to assist salaried individuals whose PAN has not been updated in the Employees Provident Fund Organization's records (EPFO).

The income tax law states that if a PF account user withdraws money from their EPF before five years have passed since the account was opened, the entire amount of the withdrawal and any PF contributions over Rs 2.5 lakh per year will also be taxed.

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Tax on income from a prior year may occasionally be subtracted later even though it was already paid in the prior year. To make it easier for these taxpayers to seek credit for this TDS in the prior year, an amendment was proposed.

If the beneficiary is a non-filer, that is, has not submitted his return of income for the prior year, and has an aggregate of TDS and TCS of Rs 50,000 or more, a higher TDS/TCS rate is applicable.

The taxpayer receives a certificate after the EPFO has deducted the TDS. One must include this TDS certificate with their Income Tax Return (ITR) in order to claim any refunds that may be due.

Notably, an EPF account holder can submit Form 15H or Form 15G to make sure that no TDS is deducted from withdrawals from the EPF account.

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Within five years of the account's establishment, TDS is taken off of EPF withdrawals.

The percentage of TDS deduction is 10% when the withdrawal amount exceeds Rs 50,000 if the PAN is on file with the EPFO. The TDS rate used to be 30% but is now 20% for withdrawals when the PAN was unavailable or not linked to the PF account.

You must wait until April 1, 2023, when the new requirements take effect in the new fiscal year if you intend to withdraw money from an EPF account that is not connected to a PAN.