No TDS on PF withdrawal upto Rs 50000

Good News!!! No TDS for provident fund withdrawals of up to Rs 50,000 from June 1, 2016

The Finance Act, 2016 has amended section 192A of Income Tax Act, 1961 to raise the threshold limit of PF withdrawal from Rs 30,000 to Rs 50,000 for Tax Deducted at Source (TDS) with effect from June 1, 2016

Statutory position

Sec 192A of the Income tax Act, as amended by Finance Act, 2016 reads as follows:

“Notwithstanding anything contained in this Act, the trustees of the Employees’ Provident Fund Scheme, 1952, framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or any person authorized under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax thereon at the rate of ten per cent :

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than fifty thousand rupees:

Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate”

Salient features

1. Tax to be deducted at source at the time of payment of accumulated balance of EPF
2. Tax to be deducted only when the aggregate amount of payment equals or is more than Rs 50,000 (earlier limit Rs 30,000)
3. Tax to be deducted only when withdrawal is made before 5 years of completion of service.
4. The rate at which tax is to deducted is 10% in case PAN is submitted
5. Tax to be deducted at maximum marginal rate of 34.608 per cent if a member fails to submit PAN.
6. No tax in following situations:
   1. On Transfer of PF from one account to another PF account.
   2. Withdrawal on Termination of service due to ill-health of EPF member and
   3. On discontinuation of Business by the Employer or any cause beyond the control of EPF Scheme’s member
   4. If employee withdraws amount more than or equal to Rs. 30,000/- (Rs 50,000), with service less than 5 years but submits Form 15G /15H along with his / her PAN.

Following flowchart will help you understand the implications of Sec 192A.

Notes to the flowchart:

• This provision is for employee Provident fund and not Public Provident fund (PPF).

• Form 15H is for senior citizens (60 years & above) and Form 15G is for individuals having no taxable income. Do note that not every individual can submit Form no 15 G. Only the individual, whose tax on the estimated income for the year is NIL and the amount of interest income from all the sources / securities does not exceed the minimum exemption limit, can submit Form 15 G form.

• Form Nos. 15G and 15H cannot be accepted if amount of withdrawal is more than Rs. 2,50,000/- and Rs. 3,00,000/- respectively.

You might also find our following articles useful:

1. http://taxingtax.com/need-know-employees-provident-fund/171/
2. http://taxingtax.com/keep-few-things-in-mind-while-changing-jobs/280/
3. http://taxingtax.com/missed-income-tax-proof-submission-deadline-still-can-save-tax/312/
4. http://taxingtax.com/provident-funds-taxability-including-withdrawal-of-balance-of-provident-fund/85/