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  1. Provident Fund: Is withdrawn EPF amount taxable? What Income Tax return filers must know

Provident Fund: Is withdrawn EPF amount taxable? What Income Tax return filers must know

Provident Fund is probably the best savings scheme for retirement benefit in India.

By: | Updated: August 12, 2018 9:01 AM
EPF withdrawal is taxable under certain circumstances.

Provident Fund is probably the best savings scheme for retirement benefit in India. It is risk-free and gives guaranteed returns. Contribution towards the EPF account is exempt from tax under Section 80C of the Income Tax Act. EPF accounts are government-run and managed by the Employees’ Provident Fund Organisation (EPFO). The scheme was established in 1952 and was initially created to offer industrial workers a stable income post retirement. The plan was later extended to all salaried people.

The government also mandated that all establishments that have more than 20 employees are required to contribute to the scheme.

How does EPF account work?

Under the EPF Act, an employee has to contribute 12 per cent of his/her monthly salary to the account. The same amount is contributed by the employer. The funds accumulated in an employee’s PF account also earns interest through the course of the individual’s employment. Currently, the rate of interest on EPF account is 8.55 per cent yearly.

An EPF subscriber ideally is supposed to withdraw their EPF contribution on retirement. However, people can also withdraw the amount under certain circumstances which include medical illness, funding marriage arrangements and purchasing a new home, among others.

But is your EPF withdrawal taxable?

It is yes and no. EPF withdrawal is taxable under certain circumstances which are:

Serial No Scenario Taxability
1 Amount withdrawn is < Rs 50,000 before completion of 5 continuous years of service No TDS. However, If the individual falls under the taxable bracket, he has to offer such EPF withdrawal in his return of income
2 Amount withdrawn is > Rs 50,000 before completion of 5 years of continuous service TDS @ 10% if PAN is furnished;No TDS in case Form 15G/15H is furnished
3 Withdrawal of EPF after 5 years of continuous service No TDS.Further, the individual need not offer the same in the return of income as such withdrawal is exempt from tax
4 Transfer of PF from one account to another upon a change of job No TDS.Further, the individual need not offer the same in return of income as it is not taxable.
5 Before completion of 5 continuous years of service\ ifemployment is terminated due to employee’s ill health

The business of the employer is discontinued

or the reasons for withdrawal are beyond the employee’s control

No TDS. Further, the individual need not offer the same in the return of income as such withdrawal is exempt from tax

Ways to check EPF Balance Online:

You can check your PF balance by various methods, which include through online portal, SMS services, missed call, M-sewa app and UMANG app, among others.

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