Finance Minister Nirmala Sitharaman in her Budget Speech on Wednesday (February 01) announced a reduction in TDS rate on EPF withdrawals for non-PAN cases from existing 30 per cent to 20 per cent.
This reduction in tax deducted on withdrawals from employees’ provident fund is going to help the salaried individuals whose PAN has not been updated in the records of EPFO (Employees Provident Fund Organisation).
According to the existing Income Tax laws, TDS is deducted on the EPF withdrawals within 5 years of the opening of the account. If the PAN is available with the EPFO, then TDS is deducted at the rate of 10 per cent when the withdrawal amount exceeds Rs 50,000. However, for such withdrawals where the PAN is not available or linked to the EPF account, the TDS rate was 30 per cent.
Now, the TDS rate has been reduced to 20 per cent. This is going to help the salaried individuals in the low income group. The second proviso under Section 192A of the Income Tax has been omitted.
The Budget 2023 memorandum read, “It was observed that many low-paid employees do not have PAN and thereby TDS is being deducted at the maximum marginal rate in their cases under section 192A. Hence, it is proposed to omit the second proviso to section 192A of the Act, so that in case of failure to furnishing of PAN by the person relating to payment of accumulated balance due to him, tax will be deducted at the rate of 20 per cent as in other non-PAN cases in accordance with section 206AA of the Act, instead of at the maximum marginal rate.”
An EPF account holder can submit Form 15H or Form 15G to EPFO to ensure that no TDS is deducted on the withdrawals from the EPF account. Form 15G is applicable for individuals below 60 years age and Form 15H is for those above 60 years.
Once the TDS is deducted by the EPFO, a TDS certificate is issued to the taxpayer. You can submit the TDS certificate while filing Income Tax Return (ITR) to claim refund if any.
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