All of us know that several companies have cut salaries and laid off employees amid loss of business due to the Covid-19 lockdown. This has hit employees hard, forcing them to withdraw money from their investments like Public Provident Fund (PPF) and Employees' Provident Fund (EPF). While it's not advisable, there are cases when you have no other option but to dig into your savings. It is important to know that in case you made any of these withdrawals in the last six months, you should know about the tax implications. 

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What makes PPF and EPF different from other schemes is that both of them fall under exempt-exempt-exempt (EEE) tax regime, which means investments made in PPF/ EPF in a financial year, interest earned on the savings and maturity benefits are exempt from tax.  

Now, while PPF comes with a lock-in period of 15 years, subscribers are allowed to make tax-free partial withdrawal after expiry of five days. The maximum partial withdrawal that can be made is 50% of the balance standing at end of the fourth year. Also, PPF account holders are allowed to prematurely close their account and withdraw all the balance after five years of contribution in case of emergencies like treatment of life-threatening diseases. This amount will not be taxable. 

You can also make tax-free partial withdrawals from EPF after five years for different purposes as mentioned by EPFO.  

The EPFO allows subscribers to make these withdrawals before five years in certain cases. The government also allowed tax-free partial withdrawal/ advance from EPF account for up to three months’ basic and dearness allowance or 75% of the balance in the account, whichever is lower. This withdrawal is exempt from tax. 

The move was ordered by the government in the wake of COVID-19 pandemic.