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
(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.
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