The partial or full fund withdrawal from the Employee Provident Fund (EPF) has become easy and faster because of the change of rules by the Employees’ Provident Fund Organization (EPFO). Now, the subscribers have the ease of making a partial withdrawal for their PF account using the online portal. The body changed the rules in December 2018 that allows the PF subscribers to withdraw up to 75% of their cumulative funds’ corpus after they have left their job within one month. If that employee remains unemployed for two months or more, then he/she can withdraw 100% of their EPF funds.
Important Pointers to Consider Before EPF Withdrawal
But there are a few conditions that the subscriber needs to consider before withdrawal or partial withdrawal of the funds from the EPF account that are:
- The EPF Fund will be taxable if the employee has not completed the work duration of a minimum of five years.
- If the employee has transferred their EPF from the previous employer to the new employer, then the time period of previous employment will also be considered. It is for the calculation of the total employment period for income tax purposes.
- In case of withdrawal, if the employment duration is less than five years then, the subjected amount will be prone to income tax deductions.
- The amount that is in the EPF account has the following components: Contribution of employees, the contribution of the employer, and the interest that it receives on both of the contributions.
- In case the continuous employment of an individual is less than five years, the employer’s contribution to the employee’s EPF account and the received interest will become taxable under Income Tax Returns (ITR). It will be taxable under the category of ‘Income from other sources sources’ in the subscriber’s account.
- Under the ‘Salary’ of the subscriber, the contribution of the employee will also become taxable. It is possible in case of withdrawal made before the completion of employment of five years. It will also become taxable if the subscriber has claimed deductions for the contributions under Income Tax Act, section 80C.
- In case of the withdrawal before five years, the interest amount received on the employee’s contribution for the EPF funds will be taxable. It will be taxable under the ‘Income from other sources’ rule.
- 10% of TDS will get imposed on the funds’ withdrawal before completion of continuous five years of employment.
- However, if the company shuts down or the fund amount is less than ₹50,000, then no TDS will get deducted from the funds.
- To avoid TDS on EPF withdrawal, submission of Form 15G or 15H is important. Form submission is important if the net income of the subscriber for the fiscal year is below the taxable income. Form 15G is for the individuals who do not have taxable income. Form 15H is for the senior citizens (60 years and above).
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