The Employees' Provident Fund Organisation (EPFO) last week issued a notification regarding the Tax Deducted at Source (TDS) liabilities that the members must be aware of, in case you're thinking of withdrawing your money from the Employee Provident Fund. The provident fund has various tax rules for withdrawing money and a tax deducted at source (TDS) is applicable on withdrawing money before five years of service. The government has announced a new rule on tax deductions, applicable from April 1. According to the revised guidelines, on an EPF deposit of more than ₹2.5 lakh, the interest will also be taxed. In the current financial year, employees who have an EPF account are getting an interest of 8.50 per cent on their deposits.
Check out the new rules for withdrawal of PF from 1st April
If money is withdrawn from the EPF before five years of service, a TDS of 10 per cent is imposed on the amount, if it is more than ₹50,000. However, if he or she submits Form 15G/15H along with their PAN, no TDS will be imposed on the amount.At the same time, once an employee completes five years of service as a permanent employee, he or she will not be taxed on withdrawing money from their PF account.
The term 'permanent employee' is of special importance here because if an employee joins on probation or contractual basis for a year and then serves as a permanent employee in a company for four years, the employer will deduct TDS on withdrawal from EPF.
However, under certain special circumstances, such as if an employee has taken ill or if the company shuts down, money can be withdrawn from EPF before five years without any tax deductions. Apart from this, in case an employee has not submitted his or her PAN details, TDS is deducted at the maximum marginal rate of 34.606 per cent.