EPF Withdrawal Rules: Tax can also be imposed on withdrawal from a PF account, know when and why?

EPF Withdrawal Rules: A company employing 20 or more employees is required to register with the Employees' Provident Fund Organization (EPFO).

PF Withdrawal Rules: This is the reason why money is deducted from the PF account of most of the people working in the organized sector. Many employees believe that no tax has to be paid on withdrawal from EPF accounts. But, this is not completely true. In some circumstances, you may have to pay taxes on withdrawals.

If you withdraw the amount after contributing to EPF for five years, then the EPF account holder does not have to pay any tax. Now it does not matter whether you have worked in one company or more than one in these 5 years. But, if you have not worked for 5 years and withdraw the amount deposited in the account, then you will have to pay tax.

Yes, under certain circumstances, tax exemption is also available on withdrawal before five years. Such as loss of job due to ill health of the employee, closure of the employer's business, or other reasons for which he is not responsible at all.

If you withdraw money before five years, you will have to pay tax. You will have to pay this tax in the same year in which you withdraw capital from your PF account. Suppose a person starts depositing in PF in 2021-22 and wants to withdraw the deposited amount in EPF in 2024-25, then he will have to pay tax in the year 2024-25.

Tax will be calculated as per the tax slab applicable to your total income for the year in which you contribute to PF. PF deposits have four components, employee contribution, employer contribution, interest on employer contribution, and interest on employee contribution. If the amount deposited in PF is withdrawn before 5 years, then tax is levied on all four parts.

The point to be noted here is that the tax liability on employee contribution mainly depends on two factors. If the employee avails deduction under Section 80C on his contribution, his contribution will be taxable. Their contribution will be considered part of the salary. But if deduction under section 80C is not availed, the employee's contribution will not be taxable. The employer's contribution and the interest received on it are considered part of the salary.

If a withdrawal is made before 5 years then it becomes taxable. If money is withdrawn from the provident fund before 5 years and the subscriber's PAN card is not linked, then 20 percent will be deducted. If your PF account is linked to PAN, TDS will be deducted at the rate of 10 percent.

If the amount deposited in EPF is less than Rs 50 thousand then you will not have to pay TDS. If your income is below the taxable limit then you can avoid TDS by submitting Form 15G or 15H.