TDS is deductible on EPF withdrawals within 5 years of account opening.

Currently, the TDS rate for exempting taxable components from the Employee Reserve Fund Scheme in non-PAN cases is 30%.

Introducing the Union 2023 Budget, Finance Minister Nirmala Sitharaman announced a reduction in the withholding tax (TDS) rate on withdrawals from the Employee Provident Fund (EPF) for non-PAN cases.

The government has now reduced the TDS rate from 30% to 20% on the taxable portion of the EPF withdrawal in non-PAN cases.

This reduction in withholding tax on EPF withdrawals is expected to help employees whose PAN has not been updated on the Employee Provident Fund Organization (EPFO) records.

In a budget speech, the Minister of Finance said: “Currently, the TDS rate for removing taxable components from the Workers’ Reserve Fund Scheme in non-PAN cases is 30%. It is proposed to reduce it to 20%, as in other non-PAN cases.”

Budget 2023 PDF: How to Access the Budget Document, Speech by Foreign Minister Nirmala Sitharaman

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Sometimes tax on income from an earlier year is deducted later, and tax on it has already been paid in the previous year. The amendment was proposed to make it easier for such taxpayers to obtain credit for that TDS in the previous year.

A higher TDS/TCS rate applies if the beneficiary fails to submit an income tax return for the previous year and has a combined TDS and TCS of Rs 50,000 or more.

It is now proposed to exclude a person who is not required to file an income tax return for the previous year and who has been notified by the government.

Once TDS is deducted from EPFO, a certificate is issued to the taxpayer. When filing an income tax return (ITR) in order to receive a refund, if any, you must provide this TDS certificate.

Notably, Form 15H or Form 15G may be submitted by the EPF account holder to ensure that no TDS will be deducted from withdrawals from the EPF account.

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Form 15G is applicable for persons under 60 years of age, while Form 15H is for persons over 60 years of age and older.

TDS is deductible on EPF withdrawals within 5 years of account opening.

If PAN is available with EPFO, then the TDS deduction rate is 10% when the withdrawal amount is over Rs 50,000. However, for those withdrawals where PAN was unavailable/linked to the PF account, the TDS rate was 30%, which has now been reduced to 20%.

If you are planning to withdraw funds from your EPF account and if the account is not linked to a PAN, you will have to wait until April 1, 2023 when the new provisions come into effect in the new fiscal year.

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Namit Singh Sengar Namit is Senior Associate Editor of Business Vertical. With over five years of experience, he focuses on personal finance, brands, and economics….Read More

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