When is EPF withdrawal taxable? Is TDS deducted on transfer of fund, payment of advance?

EPFO Taxability: A member with the Employees’ Provident Fund Organsiation (EPFO) is liable to pay TDS (Tax Deducted at Source) on withdrawal of his Employees’ Provident Fund (EPF) if his term of service is less than five years and the accumulated amount in the his EPF account exceeds Rs 50000.

However, you can save TDS by depositing your PAN and submitting Form 15G/15H. If 15G/15H is not submitted, then the TDS will be deducted at 10 per cent.

If the PF account is linked with a valid PAN, rate of TDS shall be at 10 per cent as per Sections 194A of the Income Tax Act.

On non-submission of PAN, the tax deducted at source will be at the rate of 34.60 per cent.

There will be no TDS deducted in case of transfer of fund, payment of advance or service is terminated by the employer beyond the control of employee.

However, there will be no TDS deduction if you have served for over 5 years and your total service will be based on the period served by you with your current and previous employer.

An employee changing job and not transferring the balance into the account with his new employer and instead withdrawing the amount accumulated over a period of his service with the past employer will be subject to TDS deduction if a period of five years is not completed with the previous employer.   

Form 15G and Form 15H are declarations which can be submitted to receive payments without deduction of tax in case of members having annual income of Rs 2.5 lakh and 3 lakh respectively. Form 15H is applicable for senior citizens (over 60 years) while 15G is applicable for all others.

As for contribution towards the EPF, an amount up to Rs 2.5 lakh is not liable for tax dedeuctions.   

Also Read:  EPFO taxability: know who is liable to pay taxes on interest income and how much?