7 must know facts about Tax on EPF withdrawals

The 2015 Budget by FM Arun Jaitely had some changes with respect to withdrawals from EPF or Employee Provident Fund.

Your contribution to EPF is deducted @12% on your basic salary. This amount can be claimed as a deduction under section 80C.

Let’s take a quick look at rules of taxation of EPF withdrawals –

  • These changes are effective 1st June 2015

 

  • Withdrawals from EPF before completion of 5 years of service will attract a TDS of 10%.

 

  • If the EPF withdrawal is less than Rs 30,000 no TDS shall be applicable.

 

  • EPF withdrawals are tax free when made after 5 years of continuous service.

 

  • In calculating the 5 year term, the period of previous employment is included if the EPF balance from the previous employer is transferred to the current employer.

 

  • Quoting your PAN is mandatory at the time of withdrawal. Where PAN is not provided TDS shall be deducted at highest slab rate of 30%.

 

  • EPF withdrawals before completion of 5 years are tax exempt – when
    • employment is terminated due to employee’s ill health
    • The business of the employer is discontinued
    • or the reasons for withdrawal are beyond the employee’s control

 

More Reading:

(1) You can read about EPF and other components of salary in greater detail here – Our Guide to Salary Income & Taxes.

(2) Here is a Guide to all the deduction under section 80C.

 

If you have any questions, do comment or write to us support@cleartax.in

Comments are closed.