PF Withdrawal: The government has now decided to reduce the TDS rate on the taxable portion. In non-PAN cases, the EPF withdrawal rate has been reduced from 30% to 20%.
EPFO Withdrawal New Rule: While presenting the Union Budget 2023, Finance Minister Nirmala Sitharaman has revealed the reduction in tax deduction (TDS) rate on Employees Provident Fund (EPF) withdrawal for non-PAN holders. The government has now decided to reduce the TDS rate on the taxable portion. In non-PAN cases, the EPF withdrawal rate has been reduced from 30% to 20%. This reduction in the amount of tax deducted from EPF withdrawals is anticipated to assist salaried individuals whose PAN has not been updated in the records of the Employees’ Provident Fund Organization (EPFO).
The Income Tax Law states that if a PF account user withdraws money from his EPF before five years of account opening, the entire amount of withdrawal and any PF contribution exceeding Rs 2.5 lakh per year will also be taxable. Tax on income from a prior year can sometimes be deducted later, even if it was paid in the prior year. An amendment was proposed to make it easier for these taxpayers to avail credit for this TDS in the previous year.
TDS certificate required to claim refund
If the beneficiary is a non-filer, i.e., he has not submitted his return of income for the previous year, and the sum of TDS and TCS is Rs 50,000 or more, then the higher TDS/TCS rate is applicable. The taxpayer receives a certificate after EPFO deducts TDS. One must include this TDS certificate with their Income Tax Return (ITR) to claim any refund payable.
Notably, an EPF account holder can submit Form 15H or Form 15G to ensure that no TDS is deducted from withdrawals from the EPF account. Let us tell you that within five years of account establishment, TDS is deducted from EPF withdrawal.
20% tax will be charged if PAN is not linked
If PAN is on file with EPFO, the TDS deduction percentage is 10% if the withdrawal amount exceeds Rs 50,000. The TDS rate used to be 30%, but now it is 20% for withdrawals if PAN is unavailable or not linked to the PF account. If you intend to withdraw money from an EPF account which is not linked to PAN, you will have to wait till April 1, 2023, when the new requirements will come into effect in the new financial year.
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