Tax on EPF withdrawals

The 2015 Budget by FM Arun Jaitely had some changes with respect to withdrawals from EPF or Employee Provident Fund.

Your contribution to EPF is deducted @12% on your basic salary. This amount can be claimed as a deduction under section 80C.

Let’s take a quick look at rules of taxation of EPF withdrawals –

• These changes are effective 1^st June 2015

• Withdrawals from EPF before completion of 5 years of service will attract a TDS of 10%.

• If the EPF withdrawal is less than Rs 30,000 no TDS shall be applicable.

• EPF withdrawals are tax free when made after 5 years of continuous service.

• In calculating the 5 year term, the period of previous employment is included if the EPF balance from the previous employer is transferred to the current employer.

• Quoting your PAN is mandatory at the time of withdrawal. Where PAN is not provided TDS shall be deducted at highest slab rate of 30%.

• EPF withdrawals before completion of 5 years are tax exempt – when
  • employment is terminated due to employee’s ill health
  • The business of the employer is discontinued
  • or the reasons for withdrawal are beyond the employee’s control

Tax on EPF withdrawals

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