TDS on PF Withdrawals: EPFO Instructions & Income Tax Provisions

EPFO Instructions and Income Tax Provisions relating TDS on PF Withdrawals

TDS on PF withdrawals has been introduced to discourage pre-mature withdrawal, promote long term savings and to ensure compliance with provisions of Income Tax relating taxability of such withdrawals in certain cases.

a) EPFO Circulars relating to TDS on PF Withdrawal

In line with the provisions of Section 192A of the Income Tax act, 1961, as amended from time to time, the EPFO has made arrangement for ensuring deduction of tax at source (TDS) on taxable cases of PF withdrawal beyond the threshold limit, as explained in the ensuing paragraphs. View/ download PDF Copy of related EPFO Circulars, as under:

EPFO Circular dt. 30 May 2016

EPFO Circular dt. 23 Aug. 2016

b) No TDS on PF Withdrawals upto Rs. 50,000 from 1 June 2016 onwards

No TDS is required to be deducted under Section 192A of Income Tax Act, 1961 on withdrawals of upto Rs. 50,000 from balance in provident fund account by the pf member w.e.f. June 1, 2016, as the Government has enhanced the threshold limit from Rs. 30,000 to Rs. 50,000, even if the withdrawal is otherwise a case of pre-mature taxable withdrawal.

c) TDS Rate on PF Withdrawals

Rate of TDS applicable for PF withdrawals is 10% if the employee submits his/ her PAN number, however no TDS is applicable if declaration in Form 15G or 15H, as may be applicable, is submitted by the PF member.

On the other hand, rate of TDS on PF withdrawal shall be equal to maximum marginal rate of income tax, i.e. 34.608%, if the PF member who intends to withdraw balance from PF but fails to submit PAN, Form 15G/ 15H.

d) Cases where TDS not applicable on PF Withdarwals

TDS on pf withdrawal is not applicable in case of i) transfer of PF balance from one account to another; ii) reasons beyond control of the employee; or iii) where the balance is withdrawn after a continuous service by the employee for a period of 5 years.

e) Section 192A of Income Tax- Payment of accumulated balance due to an employee

Notwithstanding anything contained in this Act, the trustees of the Employees’ Provident Fund Scheme, 1952, framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or any person authorised under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax thereon at the rate of ten per cent.

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than thirty thousand rupees:

Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.