Employee Provident Fund (EPF) is a retirement benefits programme provided by the EPFO in which both the employee and the employer contribute 12% of the salary (or 10% for non-government enterprises) to EPF. EPF withdrawals are permitted by the Employees' Provident Fund Organisation (EPFO). However, it’s taxable under certain conditions.
EPF withdrawal is taxable when:
- EPF is withdrawn before five years of continuous service: TDS (tax deducted at source) is deducted if an employee withdraws from the EPF before reaching five years of continuous employment. No TDS is taken if the sum is less than Rs 50,000; however, if the person is subject to taxation, he or she must include the EPF withdrawal in his or her income tax return. If a PAN is not provided, 10% TDS is deducted from any sum over Rs 50,000. If forms 15H and 15G are submitted and the same regulations for offering the amount in income tax returns are in effect, no TDS is deducted.
- When EPF is unrecognised: An EPF is regarded as an unrecognised provident fund if the Commissioner of Income Tax has not approved it. Even after five years of continuous work, your withdrawals are taxed if your EPF is recognised by a body other than the Commissioner of Income Tax, such as if you belong to URPF.
The following rates are subject to TDS:
- Submission of PAN: No TDS is taken into account if 15G or 15H are provided. If 15G/15H are not submitted, 10% TDS would be deducted.
- TDS is deducted at the Maximum Marginal Rate of 34.606 percent if a PAN is not submitted.
- No TDS is deducted in case of transfer of funds, payment of advance, service is ended by the employer beyond control of the employee.
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