EPFO Tax: 10% tax is payable on PF withdrawals after 5 years and different rules apply for withdrawals up to Rs 50,000...

The Employees' Provident Fund (EPF) is a vital retirement savings scheme, but there are certain rules for withdrawing funds. Employees can make full or partial withdrawals based on retirement, unemployment, or emergencies such as medical needs, marriage, or housing. Withdrawals are taxable. However, the question is when and how much tax is levied on PF withdrawals.

What are the rules regarding PF withdrawals?
The entire EPF amount can be withdrawn upon retirement. The retirement age set by the EPFO ​​is 55 years.
An employee can withdraw 90% of the EPF amount upon attaining the age of 54, one year before retirement.
An employee can withdraw 75% of the EPF amount after one month of unemployment. The remaining amount will be transferred to the PF account of the new employee.
An employee can withdraw the entire EPF amount after two months of unemployment.
EPF funds can be withdrawn without the employer's consent by obtaining online approval if the Aadhaar is linked to the UAN and the employer approves it.

TDS is deducted when withdrawing PF.
If you've ever withdrawn money from your Provident Fund (PF) and found that some amount has disappeared, it's likely due to TDS. When you withdraw money from your PF before completing 5 years of continuous service, a portion of it may be deducted as TDS.

TDS is a system by which the government collects tax at the time of income generation. Simply put, when you earn income such as salary, interest, rent, or payment for services, the person or company making the payment deducts a small portion of tax before paying it to you.

Are PF withdrawals up to Rs. 50,000 tax-free?
If you withdraw from EPF before completing 5 years of continuous service, the withdrawal amount is taxable. However, if the amount is less than Rs. 50,000, no TDS will be deducted. Your tenure with a previous employer is also included in calculating the 5 years of service. If you transfer your EPF balance from your old employer to a new one and your total service period is 5 years or more, no TDS will be deducted. Remember, you must calculate the exact 5 years; any deductions will be invalid.

You can check the TDS deducted on your Form 26AS and claim credit for it when filing your Income Tax Return (ITR). If excess TDS was deducted on PF withdrawals and your total income is below the taxable limit, you can claim a refund when filing your return.

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