New Delhi. The Employees’ Provident Fund (EPF) is a vital retirement savings scheme, but withdrawals are subject to certain rules. Employees can make full or partial withdrawals based on retirement, unemployment, or emergencies such as medical needs, marriage, or housing. Withdrawals from PF funds are taxable. However, the question is when and how much tax is applicable on PF withdrawals.
What are the rules regarding withdrawal of PF ?
- The entire EPF amount can be withdrawn upon retirement. The retirement age set by the EPFO is 55 years.
- An employee can withdraw 90% of the EPF amount one year before retirement after attaining the age of 54 years.
- An employee can withdraw 75% of their EPF balance after one month of unemployment. The remaining amount will be transferred to the new employee’s PF account.
- An employee can withdraw the entire EPF amount after two months of unemployment.
- EPF amount can be withdrawn even without employer’s consent by obtaining online approval, if Aadhaar is linked to UAN and the employer has approved it.
TDS is deducted on PF withdrawal
If you’ve ever withdrawn money from your provident fund (PF) and noticed some amount missing, chances are it’s due to TDS. When you withdraw money from your PF before completing five years of continuous service, a portion of it may be deducted as TDS.
Is PF withdrawal up to Rs 50,000 tax free?
If you withdraw from EPF before completing 5 years of continuous service, the withdrawal amount is taxable. However, if the amount is less than ₹50,000, no TDS will be deducted. Your tenure with the previous employer is also included in calculating the 5 years of service. If you transfer your EPF balance from an old employer to a new employer and your total service period is 5 years or more, no TDS will be deducted. Remember, you must calculate the exact 5 years; any deductions will be invalid if you reduce the number by a few days.
You can check the TDS deducted on your Form 26AS and claim credit for it when you file your income tax return (ITR). If excess TDS was deducted on PF withdrawals, and your total income is below the taxable limit, you can claim a refund when you file your return.
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