EPF Withdrawal : TDS on EPF Withdrawal – New Rules 2016, TDS on Employees Provident fund withdrawal, There are many Queries related to TDS on EPF like – TDS on Provident Fund Withdrawal, Withdrawal from Provident Fund before Completion of 5 things, EPF Withdrawals – New rules & Provisions related to TDS, Tax on EPF withdrawal. Provident fund is one of the best social security schemes ever implemented in India. It’s the best way which leaves a compulsion to the citizens to set aside a part of their earnings. Recently there have been many social security schemes coming up. But EPF has its unique identity in terms of many things. Check more details for “EPF Withdrawal : TDS on EPF Withdrawal – New Rules 2016” from below….
EPF withdrawal Budget 2016-17 update
In case of payment of accumulated balance due to an employee in EPF, the TDS limit is being raised from Rs 30,000 to Rs 50,000. So, TDS is not applicable if the PF withdrawal amount is less than Rs 50,000. This new TDS thresh-hold limit will be effective from 1st April, 2016 onwards.
EPF Withdrawal : TDS on EPF Withdrawal
Recently a new circular has been issued by the income tax India department which makes it compulsory to deduct tax on EPF amount withdrawn if it qualifies the conditions related. let’s have a discussion on this.
Must Read – Basic details – Employee Provident Fund
Most of the working group while switching over to another employer withdraw the balance amount in their of account. We can the new circular brought by the income tax department is to change this kind of attitude of the working class. Instead of withdrawing they can transfer their money to new one.
Normally EPF has the following features from taxation perspective :
1) Employer contribution to pf subject to a maximum 12% of salary plus deafness allowance is exempted from tax.
2) And the employees contribution towards pf is deductible under section 80C.
3) interest on employees and employers contribution is exempted from tax but subject to 9.5%.
Another major condition about EPF is the lock in period of minimum service. This is 5 years. If anyone withdraws it before 5 years of service then he would be liable to pay get cancelled the tax benefits he availed till the day.
Must Read – Employees Stock Option Plan (ESOP)
TDS on EPF :
Employees Provident fund organization will deduct the tax on the amount of pf withdrawal if it matches the following conditions :
(1) The employee has not completed total 5 years of continuous service.
(2)The EPF withdrawal amount is more than
30,000 (New Limit 50000)
Things to be known before thinking about TDS on EPF :
(1) 5 years of service means all the period you worked for different employers without failing to transfer the pf balance from the previous employers.
(2) For example if you have worked for an Employer for 4 years and then after joined another then if you transfer the pf balance from previous employers record to the new employer Without withdrawing it then the 4 years period would be considered for continuous service.
Must Read – Employee Pension Scheme – Basic Details
TDS on pf varies from situation to situation on the basis of threshold limit and submission of PAN.
(1) If the amount of pf withdrawn is more than
30000 (New Limit 50000) rupees then it attracts TDS . In this situation if the employees submit the details of their PAN then there arises two more things as whether form 15g/ 15h has been submitted or not. If submitted TDS is not required to be deducted. If it is not submitted then tax has to be deducted @ 10%.
(2) If the PAN is not submitted then it is to be deducted at maximum marginal rate 34.6%.
(2) Even If the employee has not rendered continuous service of five years, but the service is terminated due to employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.
Updates for EPF withdrawal Rules
Latest Update (20-Apr-2016) : “Govt rolls back new EPF withdrawal norms and old system will continue. The notification which was issued on 10th Feb, 2016 has been cancelled.” So, the existing rules will be continued..
Latest Update (18-April-2016) : The Minister of state for Labour and Employment (Independent charge) now decides to postpone the date of implementation of new conditions for EPF withdrawal to 1st August 2016. This was earlier planned for implementation from 1st May 2016.
Budget 2016-17 New EPF Rules : Latest News (08-March-2016) : The Budget 2016-17 proposal of levying income tax on 60% of EPF balance has been withdrawn by the government. So, no tax will be levied on PF withdrawals at the time of retirement. The other Budget proposal to make 40 per cent of the total withdrawal from the National Pension Scheme (NPS) will however remain unchanged.
My EPF balance
If an employee wishes to withdraw after continous service of 5 yrs, then also the limit of Rs.50,000 is to be checked for TDS purpose ?
I WAS VERY MUCH IMPRESSED WITH YOUR SITE UPDATES.THANK YOU.
Thanks khushbu panchal