TAX deducted at source (TDS) IN case of premature PF withdrawal

Tax on premature PF withdrawal

Staff Reporter

The Employees Provident Fund Organisation is deducting tax at source from June 1 on PF withdrawals if the accumulated PF balance at the time of payment is more than or equal to Rs. 30,000 and the employee has worked less than five years.

“The Finance Act, 2015 (20 of 2015) has inserted a new section 192A regarding the payment of accumulated provident fund balance due to an employee. The provision comes into effect from June 1, 2015,” an EPFO circular said.

According to the circular, TDS will be deducted at the rate of 10 per cent provided PAN is submitted. In case form 15G or 15H is submitted by the member, then no TDS will be deducted. The circular further states that TDS will be deducted at the maximum marginal rate of 34.608 per cent if a member fails to submit PAN, form 15G or 15H.

However, there are certain exceptions to deduction of TDS by EPFO. TDS will not be deducted in case of transfer of PF from one account to another. Besides, it will not attract TDS if the employee is terminated from service due to ill health of member and discontinuation or contraction of business by employer. The organisation will also not deduct TDS if the employee withdraws PF after a period of five years of continuous service, including service with former employer.