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. These withdrawals are taxable at some instances and exempt under other instances.
If a person withdraws EPF post completion of five year service, then it’s tax free.
"But, if the person withdraws it without completing the five year tenure, in that case it’s taxable with a few exceptions such as employment termination and medical emergencies," explains Pranjal Kamra, chief executive officer, Finology.
The EPF amount is also taxable if there is a break in the contribution to the account for five continuous years. In that case, the entire EPF amount is considered as taxable income for that financial year.
TDS (Tax Deducted at Source) is deducted at 10 percent on EPF balance if it is withdrawn before five years of service. However, subscribers should remember to use Permanent Account Number (PAN) at the time of withdrawal.
"If PAN is not provided, TDS can be deducted at highest slab rate of 30 percent if the employment service is less than five years," as per ClearTax.
Tax is deducted at source on premature withdrawal of the EPF corpus.
Nevertheless, there is an exception here too.
If the entire amount withdrawn is less than Rs 50,000 (in case service is less than five years), then TDS is not applicable.
In case, an employee transfers the EPF balance from the old employer to a new employer and the total employment is five years or more, no TDS is deducted.
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 credited to the subscriber’s account within 10 days.
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.