PF INCOME TAX RULES: EPFO news alert! Withdrawing Money? TAXABLE or Not? Find here
People put their contribution in the Employees' Provident Fund (EPF) because it gives secure money and high returns if it is compared with other fixed options such as PPF, Fixed Deposit.
People put their contribution in the Employees' Provident Fund (EPF) because it gives secure money and high returns if it is compared with other fixed options such as PPF, Fixed Deposit. But the best part of EPF is that it is exempted from tax status. Contribution towards an EPF account provides a benefit to individuals by way of a deduction under Section 80C.
Although, here is the catch! Yes, it is exempted from tax till the time of maturity. But if you are making a partial withdrawal or complete withdrawal before maturity, then EPF withdrawal is taxable. It would also be good to know what the income tax or TDS implications of EPF withdrawal would be? EPF withdrawal is taxable and exempted under certain situations. Let’s understand these situations in detail.
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1) EPF is withdrawn before 5 years: If you withdraw from EPF before completing 5 years of continuous service, TDS will be deducted.
2) Temporary employee for some time of 5 years: If you are working for a temporary position for a certain period and your employer is not putting his contribution towards your EPF. Then you got permanent, and your contribution employer's contribution starts. Now after completing 5 years, you resign, still the employer will deduct TDS from your EPF withdrawal.
3) If it’s an unrecognised EPF: To enjoy income tax benefits, a fund has to be approved by Income Tax Commissioner. If not, then it is considered an unrecognised provident fund.
4) Amount withdrawn is less than Rs 50,000 before the completion of 5 years. No TDS. However, if the individual falls under the taxable bracket, he has to offer such EPF withdrawal in his return of income
5) Amount withdrawn is more than Rs 50,000 before the completion of 5 years. 10 per cent of TDS if PAN is furnished; No TDS in case Form 15G/15H is furnished.
6) Transfer of PF from one account to another upon a change of job. No TDS. Further, the individual need not offer the same in return for income as it is not taxable.
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