TDS on EPF: When TDS is applicable on EPF withdrawal, how to avoid it

When an employee reaches the age of 58, his or her EPF account matures. If an employee is unemployed for 60 days in a row, the amount in his or her EPF account is paid to the employee in full and that amount will be tax-free. However, if the employee withdraws the amount before it matures while he is employed, tax deducted at the source (TDS) will be applicable.

The Employees’ Provident Fund Organisation (EPFO) in a tweet notified its members about the TDS obligations they must be aware of.


What is TDS

‘Tax Deducted at Source’ is the abbreviation for ‘TDS.’ It was established to collect tax at the point of generation of an individual’s income. TDS is a tax collection mechanism used by the government to reduce tax evasion by collecting revenue (partially or entirely) at the moment it is generated rather than at a later date.

TDS is levied on a variety of revenues, including salary, interest, commissions, dividends, and so on.

When TDS is not deducted on EPF?

According to the EPFO website, these are the instances when TDS will not be deducted on EPF:

  • Transfer of PF funds from one account to another.
  • Termination of service due to a member’s illness, the employer’s decision to stop doing business, the conclusion of a project, or any other reason beyond the member’s control.
  • If an employee withdraws his or her PF after a five-year period.
  • If the PF payment is less than Rs. 50,000 but the member has less than 5 years of service.
  • If an employee with less than 5 years of service withdraws an amount greater than or equal to Rs. 50,000 but submits Form 15G/15H along with their PAN.

When will TDS be deducted

According to the EPFO website, these are the instances when TDS will be deducted on EPF:

If an employee withdraws more than or equivalent to Rs 50,000 with less than 5 years of service.

a) TDS will be deducted at a rate of 10% if Form-15G/15H is not submitted but PAN is submitted.

b) If an employee fails to submit a PAN, TDS will be deducted at the maximum marginal rate (34.608 percent).

According to EPF, these are things to note:

1. At the time of payment, TDS is deducted.

2. TDS will be deducted in accordance with Section 192A of the Income Tax Act of 1961.

3. Form 15H is for senior persons (60 years and over), whereas Form 15G is for those with no taxable income. Self-declarations, Forms 15G and 15H, may be accepted in duplicate.

4. When submitting Form No 15G/15H and Form No 19, members must include their PAN.

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