PF Rules 2022: When Does TDS Apply to EPF Withdrawals?

The Employee Provident Fund Organisation (EPFO) issued an important statement last month on liabilities related to tax deducted at source (TDS) that all of its members should be aware of.

EPF is the government’s retirement plan that helps employed people plan for their future. Having said that, anyone who has invested in it may withdraw funds after retirement at the age of 60, or even before.

An employee’s EPF account matures when the employee reaches the age of 58. If an employee is unemployed for 60 days in a row, his EPF account balance to be paid in full to employee, and the money is tax-free. If the employee withdraws the funds before the account matures while still employed, Tax Deduction at Source (TDS) will apply.

The government has announced a new tax deduction law that will go into effect on April 1. The interest on an EPF deposit of more than 2.5 lakh would be taxed, according to the amended guidelines. Employees with an EPF account are earning 8.50% interest on their deposits for the current financial year.

TDS is deducted on withdrawals made within 5 years of creating a PF account, however there are numerous other times when you must pay TDS. Let us know when and why TDS is deducted, as well as how it might be avoided.

When TDS will be Deducted from EPF:

• If an employee with less than five years of service withdraws more than or equal to Rs 50,000.
• If Form-15G/15H is not submitted but PAN is, TDS will be deducted at a rate of 10%.
• If an employee fails to submit a PAN, TDS at the maximum marginal rate will be deducted (34.608 percent).

In the below Cases TDS is not liable to deduct from EPF:

• After a five-year period, an employee may withdraw his or her PF.
• If the member’s PF payment is less than Rs. 50,000 and he or she has less than five years of service,
• Transfer of PF funds between accounts.
• Service termination due to a member’s illness, the employer’s decision to cease operations, the completion of a project, or any other reason beyond the member’s control.
• If an employee with less than five years of service withdraws more than or equal to Rs. 50,000 but submit Form 15G/15H along with their PAN.