TDS on PF Withdrawals u/s 192 of Income Tax along with EPFO Instructions

TDS on PF withdrawals u/s 192 of Income Tax has been introduced to discourage pre-mature withdrawal, promote long term savings and to ensure taxability of such withdrawals in certain cases. Also, the EPFO has issued relevant instructions for compliance of TDS provisions at the time of PF withdrawal.

EPFO Circulars relating to TDS on PF Withdrawals

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 (presently Rs. 50,000):

EPFO Circular dt. 30 May 2016 | EPFO Circular dt. 23 Aug. 2016

No TDS on PF Withdrawals upto Rs. 50,000 from 1 Jun. 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 pf withdrawal falls in the category of pre-mature taxable withdrawal (i.e. where service period is less than 5 years).

Applicable TDS Rate on PF Withdrawals

Rate of TDS applicable for PF withdrawals:

i) 10% if the employee submits his/ her PAN number,

ii) Nil/ No TDS if declaration in Form 15G or 15H, as may be applicable, is submitted by the PF member, and

iii) at maximum marginal rate of income tax, i.e. 30% income tax plus applicable education cess and surcharge (approx. 34.08%), if the PF member who intends to withdraw balance from PF fails to submit PAN.

Cases where TDS is not applicable on PF Withdrawals

TDS on pf withdrawal is not applicable in cases where:

i) transfer of PF balance is made from one account to another; or

ii) pf withdrawal is made by the employee for reasons beyond his/ her control; or

iii) pf balance is withdrawn after a continuous service by the employee for a period of 5 years; or

iv) pf withdrawal is of amount upto Rs. 50,000; or

v) pf withdrawal is of amount above Rs. 50,000 with service less than 5 years and the employee has submitted Form 15G/ 15H along with PAN.

Bare Act Text of 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 fifty 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.

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