Is Provident Fund withdrawal taxable in India? By Athulya - April 13, 2019 Last Updated at: Sep 24, 2020 0 6714 Is Provident Fund withdrawal taxable in India The monthly contribution to the Employee’s Provident Fund ( EPF) is the sole form of compulsory investment for salaried people. Not only is the contribution eligible under Section 80C for tax benefits, the interest earned as well as the money collected on the superannuation are tax-free. Typically, funds withdrawn from EPF account before the completion of five years of continuous service attract tax. You can withdraw up to three months salary (basic pay and dearness allowance) or 75% of the total EPF balance in your account. The government has amended the EPF withdrawal rules which allow an EPF member to withdraw money in case of emergency due to coronavirus from their EPF account. Provident Fund is most likely the best investment funds scheme for retirement profit in India. It is without hazard and gives ensured returns. Paying towards the EPF account is absolved from tax under Section 80C of the Income Tax Act. EPF accounts are under government and overseen by the Employees’ Provident Fund Organization (EPFO). The plan was set up in 1952 and was at first formed to offer the industrial worker a steady pay after retirement. The arrangement was later made larger to every single salaried individual. The government furthermore ordered that all organizations having more than 20 workers are required to add to the scheme. Over the period of time, retirement fund body Employees’ EPFO has made easier the procedure of taking out the employee provident fund. Presently, an EPFO member can submit an application for EPF withdrawal online and within a very period of time, the cash will be credited to the account. However, financial advisers don’t recommend early withdrawal of the EPF amount, as they state, is intended for post-retirement years. Therefore, to restrain early extraction, the legislature has planned income tax laws. Get Your Taxes Prepared by Experts The EPFO has made few changes to permit EPF amount to withdraw up to 75% of the aggregated EPF amount following one month of resigning from work. The individual can pull back the remaining 25% after being without a job for over two months. How does EPF account work? Under the EPF Act, a member of the staff needs to contribute 12 per cent of his/her monthly income to the EPF account. A similar sum is contributed to by the company. The amount amassed in a worker’s PF account likewise gains interest through the journey of the person’s service. As of now, the rate of interest on EPF account is 8.55 per cent annually. An EPF payer preferably should pull back their EPF amount on retirement. On the other hand, individuals can likewise pull back the sum in specific situations which incorporate medical treatment, financial support in marriage preparations and buying a new house, etc. Income tax on PF withdrawal Now let’s discuss how and when EPF withdrawal is taxable: EPF withdrawal is assessable if a representative does not render ceaseless administrations for a time of no less than five years. If there is a situation of a job change in within five years, and if EPF account is transferred to another company’s name, the new company owner’s period of work is likewise included to ascertain the consistent period. If the complete time of service is under five years, aggregated EPF balance pulled back ends up taxable in the budgetary year of withdrawal. It is to be noticed that there are four sections to any EPF commitment – employee’s subscription, business subscription and premium earned from both employer’s and worker’s subscription. If the time of consistent employment is under five years, the summation amount of the business’ commitment to EPF and premium earned on it is taxable under the head “salary” in the employee’s income tax return. The individual’s own contribution part of the withdrawal isn’t taxable. However, if the subscriber had asserted concluding under Section 80C on his commitment in prior years, it winds up taxable underpay. It is to be noticed that the EPFO payer’s very own contribution towards EPF is qualified for conclusion under Section 80C of the Income Tax Act. The premium received on the EPF payer’s own contribution part is tariff under ‘salary from different sources’. On pulling out the EPF amount before five years of employment, TDS or duty deducted at source at 10% is charged. However in a couple of cases, for example, if a sum is not exactly Rs.50,000 or employer shutting down the company, TDS isn’t charged. If the sum is more than Rs.50,000, and duration of employment service is under five years, the supporter can submit Form 15G or 15H to stay away from TDS in situations where the pay for that year is much lesser than a taxable amount. Form 15H is for senior residents (60 years or more) and Form 15G is for people having no taxable salary.