From April 1, the new rule regarding tax on provident fund is being implemented. Under the new rule, interest will also be taxed on deposits of more than Rs 2.5 lakh in PF.
Employees Provident Fund is a retirement scheme. When you retire at the age of 60, money is withdrawn from it. However, the facility of premature withdrawal is also available. There are different tax rules regarding withdrawal from EPF . Let us know when tax is charged on withdrawal from Provident Fund , after how much tax is not charged and if tax is levied then whether it is taxed as Tax Deduction at Source ( TDS ). From April 1, the new rule regarding tax on provident fund is being implemented. Under the new rule, interest will also be taxed on deposits of more than Rs 2.5 lakh in PF.
In the current financial year, the Employee Provident Fund is getting an interest rate of 8.5 percent. It comes in EEE i.e. Exempt, Exempt, Exempt category. Deduction benefit under section 80C is available on deposit in Provident Fund. Annual interest is tax free and maturity is also tax free.
Know the rules regarding tax
- If you withdraw from EPF before five years, then the withdrawal is taxed. Withdrawals after five years of continuous service are not taxable. TDS i.e. Tax Deduction at Source is deducted on withdrawal from PF fund.
- The period of 5 years is important for tax purposes. In such a situation, if you were training in a company for 1 year, during which you were not on the company’s permanent payroll. For the remaining four years, you work as an employee on the payroll of the company. In such cases, the employer will deduct TDS if the withdrawal is made. In such cases, the period of five years on the permanent payroll of the company is considered complete.
- If you withdraw less than 50 thousand before five years, then TDS will not be deducted. However, this information will have to be filled in the income tax return. If more than 50 thousand withdrawals are made, then 10 percent TDS will be deducted on updating the PAN. TDS of 30 percent will be deducted if PAN card is not updated. TTS will not be deducted on submission of Form 15G/15H. No tax is levied on withdrawals after five years. Withdrawals after five years are also not required to be disclosed in the income tax return.
- In some special circumstances, TDS is not deducted even if the withdrawal is made before five years. If the health of the employee deteriorates or the business of the employer is closed, then no TDS is deducted on the withdrawal.
- There are three main parts in EPF. First the contribution of the employee, the interest received on the contribution of the second employee and the contribution of the third employer and the interest received thereon.
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