EPF Withdrawal Becomes Taxable Before 5 Years Of Service

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Employee Provident Fund (EPF) is a retirement-oriented program for salaried employees backed by the government but now the EPF Withdrawal becomes taxable. Income tax has the effect of influencing contribution amounts, interest, and the ability to take out one’s balance.

Concerning the additional tax on early-withdrawal EPF, employees consider it much more important when they are planning to retire early. Even though they have not yet been eligible for benefits. The portion of your paycheck sent to your EPF account is tax-free. Basic salary (including DA) can be deducted up to 12 percent.

The interest earned from tax-free personal investments (PF) does not have to be paid to the government as long as one is employed. In other words, whenever a retired employee withdraws funds from their EPF Registration account, that sum is now taxable and must be declared as such.

EPF Withdrawal Becomes Taxable In The Below Scenarios

When you deposit the money more than or the same of Rs. 30000 (Rs. 50,000) are offered to the employees when their term in the company is within 5 years.

  • When the pan card is submitted but submission of Form-15G/15H is not done, then TDS is deducted at 10%,
  • When the employee does not submit a pan card, then TDS at a maximum marginal rate of 34.608% can be deducted.

Terms Of EPF Taxation When Withdrawn Before 5 Years

If Employment Is Temporary

If you are under contract for a set amount of time or if you are self-employed, your employer is not required to contribute to your Employees’ Provident Fund. You must be employed for a certain period. If you are a permanent employee, your company will begin deducting your EPF contributions and the EPF Withdrawal becomes taxable.

In Case Of Unrecognized EPF

An unapproved provident fund is known as an unrecognized fund. EPF Withdrawal will become taxable whether you have completed 5 years of service or not, regardless of whether you are a member of an unrecognized provident fund.

Taxation Of EPF Withdrawals

The employee’s contribution: This is the total amount that the employees’ EPF accounts have contributed. This amount does not have to be reported as taxable income. You may also have to pay more tax if you claimed deduction under section 80C on your donation in past years in your EPF Registration.

Interest in the employee’s contribution: This percentage is subject to income from other sources under the head.

Employer’s contribution and interest earned on it– It is completely taxed for the employer’s contribution and interest accrued on it. Your employer reports your earnings under the “salary” heading in your tax return. You can see the entry under “Salary TDS” in your Form 26AS if you deduct TDS when you make the entry.

EPF Withdrawal And TDS Rates

If the balance on the EPF is withdrawn before five years, the EPF Withdrawal becomes taxable and the deduction for TDS is made at 10%. You need to provide your PAN details when you withdraw the money. Failure to furnish PAN details results in TDS deduction at the highest slab rate of 30%.

How To Get an Online EPF Registration Certificate?

In case, you need any kind of direction connected with the EPF Registration, please feel free to communicate with our business advisors at 8881-069-069.

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