Employees' Provident Fund Organization or EPFO, the nodal agency that monitors the Employees' Provident Fund (EPF) contributions, allows the subscriber to make a partial withdrawal or 'advance' from the PF corpus under certain circumstances. Recently, the retirement fund body has also allowed its members to avail a second non-refundable COVID-19 advance.
These kinds of withdrawals are taxable in some instances and exempt in others.
TDS (Tax Deducted at Source) is levied on the withdrawal amounts in case the person withdraws EPF before completion of five-year service. If the EPF account is attached with Permanent Account Number (PAN), then TDS (Tax Deducted at Source) would be 10 percent. However, if the EPF account is not seeded with PAN, then the TDS rate is doubled.
According to Archit Gupta, Founder and CEO, ClearTax, if the EPF withdrawal amount is below Rs 50,000 then TDS is not incurred, even if the salary is above 2.5 lakh.
Further, EPF account holders withdrawing more than Rs 50,000 can avoid paying this TDS by furnishing Form 15G (below 60 years) or Form 15H for senior citizens, provided their annual income is below Rs 2.5 lakh.
In order to apply for these forms, subscribers must have a PAN. Some banks even allow these forms to be submitted online through the bank’s website.
"However, if account holders withdraw an amount above Rs 50,000 and the annual income is more than Rs 2.5 lakh, they would mandatorily incur TDS at 10 percent if the EPF account is attached with the PAN. Otherwise, TDS is deducted on EPF withdrawals at 20 percent if the PAN is not seeded with the EPF account," explains Gupta.
It's important to note here that the COVID-19 related PF advance is not taxable under income tax law.
Adding to that there are certain exceptions in which PF withdrawal even before 5 years of service is not taxable ( as compiled by By Kapil Rana, Founder & Chairman, HostBooks Ltd)
- If the employment has been terminated due to employee’s ill health, or
- The employer’s business is discontinued or completion of the project, or
- The other reason for withdrawal which is beyond the control of the employee.
For withdrawing money from EPF, the subscribers can put an online claim. The claim is then forwarded to the employer for approval. Once approved, the amount is generally credited to the subscriber’s account within 10 days.
However, EPFO has recently committed to settling these claims within three days of their receipt in the case the reason is cited as COVID-19. For this, EPFO has deployed a system-driven auto-claim settlement process in respect of all such members whose KYC requirements are complete in all respects.
In EPF accounts, the employees contribute 12 percent of their salaries, and an equal amount is contributed by the employers. EPFO also allows subscribers to view their balance online through its website. EPFO also provides the balance information via missed call facility and SMS service.
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First Published: IST