TDS on EPF Withdrawal u/s 192A

What is Section 192A?

A new section 192A was inserted by the Finance Act, 2015 regarding TDS on payment of accumulated provident fund balance. The Rate of TDS on EPF withdrawal is 10%. There are two components of the Employee Provident Fund:

  • Employee’s Contribution: Gets Income deduction u/s 80C
  • Employer’s Contribution: Exempt up to 12% of Salary.
  • Interest on EPF: Exempt upto 9.5% p.a

TDS on EPF withdrawal shall be deductible only if the following conditions are satisfied:

  • The amount from EPF has been withdrawn before completion of continuous 5 years of service, and
  • The amount withdrawn is more than INR 50,000.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

The Deductor is required to deduct TDS @ 10% on withdrawal of EPF. However, if the employee fails to furnish his Permanent Account Number (PAN), then, the Deductor would deduct TDS at the maximum marginal rate.
The Deductor shall deduct TDS at the time of payment of the Accumulated EPF balance due to the employee.

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TDS on EPF withdrawal not deductible

TDS shall not deducted by the trustees of the Employees’ Provident Fund or any person authorized under the scheme under the following circumstances –

  • If the employee has submitted Form 15G/ Form 15H along with the PAN.
  • If there is a termination of employment due to employee’s ill health, completion of the project for which employee was employer, discontinuation of the employer’s business, or any other reason which is beyond the control of the employee.
  • The aggregate amount of EPF withdrawal is less than INR 50,000.
  • The withdrawal has been done after a continuous service of 5 years.
  • In case of a job change, the PF amount is transferred from one account PF account to another.

TDS Return

The Deductor shall deposit TDS with the Government within 7 days from end of the month in which TDS is deducted. However, in the case of TDS deducted for the month of March, the same shall be deposited on or before 30th April. In case of TDS deduction u/s 192A deductor shall file quarterly return in Form 26Q on TRACES within following due dates :

Quarter Due Date for Filing Form 26Q
April-June 31st July
July-September 31st October
October-December 31st January
January-March 31st May
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FAQs

At what rate will the payer deduct TDS if I do not furnish my PAN to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following :
1. The Specified rate in the relevant provision of the Act.
2. Rate or rates in force, i.e., the rate prescribed in the Finance Act.
3. At the rate of 20%.​

Where can I show 192A income in ITR?

Employee’s contribution gets an income deduction under section 80C. However, if you have withdrawn money from your EPF account, then you are required to report the same by under ‘Section 10(12) Recognised Provident Fund’ from the drop-down menu. Furthermore, withdrawal from PF account will be tax-exempt only if you have completed 5 years of service.

Withdraw EPF balance – Rules, TDS Applicability, Updates and Process

EPF (Employee Provident Fund) is a retirement benefits scheme for salaried individuals. Employee’s contribution to EPF was eligible for deduction under section 80C. However, as per the recent announcement in Budget 2021, interest earned on annual PF contribution exceeding INR 2.5 lacs from April 2021 will now be taxable. Employers also contribute towards EPF and their share is tax-free in the hands of the employees.

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EPF withdrawals have always been a topic of discussion. Frequent changes in EPF withdrawal rules keep employees on the edge. The major concern for them is whether the EPF withdrawal amount is taxable or not.

So let’s take a look at the EPF withdrawal rules to understand this better:

EPF Withdrawal Rules

Withdrawal of the EPF account by a salaried employee between switching jobs is illegal. As per EPF withdrawal rules, a salaried employee can withdraw from a provident fund account on two counts;

  • If a person has no job and
  • If two months have elapsed since last employment (not attached to any organization or unemployed for 2 months).

Members whose service has been terminated due to ill health, contraction or discontinuance of business of the employer or other cause beyond the control of the member shall not be required to submit PAN, Form No. 15G/15H along with Form No. 19. In such cases, no income tax (TDS) shall be deducted as per Rule 8 of the Fourth Schedule to the Income Tax Act, 1961.

Conditions to Withdraw EPF Balance for Salaried Employees

Salaried employees can withdraw money from EPF accounts for various purposes, subject to the following conditions.

  1. A salaried employee can withdraw up to either six times of his monthly salary or total amount towards medical treatment of self, spouse, children and parents.
  2. One can withdraw for the purpose of marriage of him/herself, siblings and children provided that one has completed a minimum of seven years of service to withdraw 50% of the contribution. (3 times in the entire career)
  3. A salaried person can withdraw from EPF account for the purpose of house renovation or alteration if a person has completed a minimum of five years of service and the house should be registered in his name, his spouse’s name or be held jointly.
  4. An individual can withdraw from EPF account for the purpose of home loan repayment provided he has completed 10 years of services and the house should be registered in his name, spouse or be held jointly. Then an individual can withdraw up to 36 times of his salary.
  5. An individual can withdraw from EPF account for the purpose of Higher education of children.
  6. If a salaried person wishes to withdraw from EPF account for the purpose of either construction of house or purchase of a plot, the property must be registered in his name, spouse or jointly held. A minimum of five years of service is required to withdraw an amount which is 24 times the salary of an account holder. For the construction of a house, 36 times of the salary of an account holder can be withdrawn. This withdrawal can be done only ONCE during the service of an account holder.
  7. An individual can choose to withdraw from their EPF account for various reasons such as settling down in a foreign country or premature retirement as a result of any physical or mental disability.
  8. An individual must be 57 years old to withdraw up to 90% of the amount of his PF account( Earlier the age limit was 54 years).
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TDS on EPF Withdrawal

Before Budget 2015, TDS was not applicable on withdrawal from EPF account. But now, TDS is applicable on EPF withdrawals where balance is more than 50,000 and the employee has worked less than 5 years from 1st April 2016 onwards( Earlier the threshold limit was Rs.30,000).

TDS is not applicable in the following cases:

  • When an employee terminates his services due to ill-health and withdraws his accumulation.
  • On Transfer of PF from one account to another PF account.
  • When PF withdrawal is less than Rs 50,000/-. (Before 1st April 2016 it is 30,000/-)
  • On discontinuation of Business by the Employer or any cause beyond the control of EPF Scheme member (Employee).
  • If withdrawal amount more than or equal to Rs. 50,000/- & service period is less than 5 years then TDS will not be applicable if an employee submits Form 15G /15H along with his / her PAN. Form 15G & 15H cannot be accepted if the amount of withdrawal is more than Rs. 2,50,000/- and Rs. 3,00,000/- respectively.

TDS is applicable in the following scenarios:

If an employee withdraws amount more than or equal to Rs. 50,000/-, with service for less than 5 years, then:

  • TDS will be deducted @ 10% if Form-15G/15H is not submitted provided PAN is submitted.
  • TDS will be deducted @ maximum marginal rate (i.e., 35.535%) if an employee fails to submit PAN.

Members who have rendered continuous service of 5 years or more, including service with a former employer, shall not be required to submit PAN and Form No. 15G/15H along with Form 19.

If TDS is not applicable then it does not mean that the EPF withdrawals are not taxable. If you withdraw your EPF balance before the expiry of five years of continuous service, then it is taxable in the year of withdrawal. In addition to this, your employer’s contributions along with the accumulated interest amount will be taxed as “profits in lieu of salary”. Interest accumulated on your (employee’s) contributions will be taxed under the head “Income from other sources”.

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Recent Updates in EPF Withdrawal Rules

  • Retirement Age has been increased from 55 years to 58 years

    Earlier the age of retirement for EPF was 55 years. But now it has been increased to 58 years. At present retirement age is 58 years across all organization and now the same will be applicable for EPF.

  • You can not withdraw an Employer’s contribution to EPF before 58 years

    An individual can not withdraw the EPF contribution by the employer before the retirement age of 58 years. The withdrawals from the EPF within 5 years of joining are still taxable.

  • You can withdraw 90% of EPF balance once you reach the age of 57 years

    Earlier, a withdrawal was allowed up to 90% of the EPF balance, one year prior to retirement i.e. at the age of 54 years. But now account holder will have to wait till attaining the age of 57 years to withdraw 90% of the accumulated balance

  • EPF membership does not end with leaving the job

    An Individual cannot withdraw the EPF contribution by the employer before the retirement age. The employer’s portion can be withdrawn only after attaining the retirement age (58 years). Therefore, until you withdraw 100% of the PF balance, your EPF account is will not be closed.

How to withdraw EPF Balance?

Employee PF can be withdrawn in following different ways:

  1. EPF withdrawal via UAN (Online claim submission)

    If you know your Universal Account Number (UAN), then you can directly apply for pf withdrawal without the need for employer attestation.
    a. Link your Aadhaar to UAN
    b. Submit an application to withdraw EPF online

  2. EPF withdrawal using Form 19.

    Form-19 can be downloaded from the EPFI website. Once filled the application can be submitted to the regional EPF Office to claim the EPF balance.
    a. EPF withdrawal form attested by one of the following:
    i. Bank Manager
    ii. A Gazetted Office
    iii. Magistrate/Post Master/Sarpanch/Notary Public
    b. A letter stating a reason for the direct application:
    i. Non-cooperation from an employer is a valid reason

You can check your withdrawal claim status from the Employee’s Provident Fund Organization.

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FAQs

How can I avoid TDS on PF withdrawal?

If your PF amount is between Rs. 50,000 – 250,000 and you have provided your PAN then TDS will not be deducted. However, if you don’t submit your PAN you will be charged tax on the highest rate of tax slab.

Is KYC mandatory for PF withdrawal?

No, it is not mandatory to update KYC details online. However, updating KYC will keep your data up to date. It will also help in reducing the time required for transfer of EPF money from one account to another and for EPF withdrawal amount.

Does EPF membership end with termination of employmnet?

An Individual cannot withdraw the EPF contribution by the employer before the retirement age. The employer’s portion can be withdrawn only after attaining the retirement age (58 years). Therefore, until you withdraw 100% of the PF balance, your EPF account is will not be closed.