Major Change in EPF Rules: Form 121 Required for PF Withdrawal Before 5 Years of Service

Starting from the 2026-27 financial year, eligible employees will need to fill out Form 121 instead of Forms 15G and 15H to claim a TDS exemption on PF withdrawals; however, specific conditions must be met.

If you are planning to withdraw your Provident Fund (PF) after completing five years of service—whether due to a job change or financial necessity—it is crucial to understand the new tax rules associated with it. Under certain circumstances, TDS (Tax Deducted at Source) may be levied on the amount withdrawn from the Employees' Provident Fund (EPF). Consequently, changes have been made to the forms used to claim exemptions from this tax deduction.

According to the Employees' Provident Fund Organisation (EPFO), starting from the 2026-27 financial year, eligible employees must use Form 121 instead of Forms 15G and 15H to claim TDS exemption on PF withdrawals. However, this form is not applicable to every employee, and submitting it does not automatically make the entire PF withdrawal amount tax-free.

When is TDS deducted on PF withdrawals?

If you wish to withdraw your PF before completing five years of service, TDS may be applicable to the withdrawn amount under existing rules. Factors such as the withdrawal amount and the employee's eligibility are generally taken into account.

However, for withdrawals exceeding ₹50,000, TDS at a rate of 10% may be deducted if a valid PAN is provided. Conversely, relief may be available when transferring the PF account to another account or under specific circumstances outlined in the regulations.

What is Form 121, and who needs to fill it out?

Form 121 is a type of self-declaration in which an eligible individual states that their estimated tax liability for the relevant tax year is nil. To obtain relief from TDS deduction under this provision, certain conditions must be met:

Your estimated tax liability must be nil.
You must meet the eligibility criteria for submitting Form 121.
You must verify the rules regarding the PF withdrawal amount and the duration of service.