Planning PF withdrawal? Know Income Tax impact on money amount that will be credited in your bank account
Employee Provident Fund (EPF), a government-backed scheme, is one of the most important financial security facilities available to working individuals. The contribution to EPF is reduced to 10 per cent. It was 12 per cent earlier for non-government organisations. The employer and employee deposit their contribution with the Employee Provident Fund Organisation (EPFO) every month.
The accumulated or a part of the amount in an EPF account can be withdrawn by the employee in the event of retirement, or resignation. The PF amount can be transferred from one company to another in case the employee changes his job.
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This is important to mention that the Employees’ Provident Fund Organisation has allocated the Universal Account Number (UAN), which is compulsory for all the employees covered under the PF Act. So, now how this helps? The UAN would be linked to the employee’s EPF account. The UAN remains portable throughout the service of an employee, and therefore, there is no need to apply for EPF transfer at the time of changing jobs.
Although, the PF amount 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. EPF withdrawal is taxable and exempted under certain situations. But then is there any solution to avoid TDS on EPF withdrawal? Yes, there are few things that can be done to avoid TDS on EPF withdrawal.
1) When you change jobs, do not withdraw the EPF amount. Transfer it to the new account at your new company.
2) If you can defer withdrawing funds from your account for five continuous years of service with all employers, then thereafter withdrawals will not attract any TDS.
3) If the withdrawal amount is less than Rs 50,000, then you don't have anything to worry about because no TDS is deducted.
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