Section 192A of the Income Tax Act mandates the deduction of TDS on withdrawals from the Employees’ Provident Fund (EPF). According to this provision, TDS must be deducted at the time of EPF withdrawal. This means that when you withdraw money from your EPF account, a certain percentage of the total amount is deducted as TDS, and the remaining balance is credited to you. The purpose of this provision is to ensure that, similar to other sources of income, tax is appropriately paid on EPF withdrawals.
Apart from TDS applicability, the EPFO has laid down several specific guidelines for withdrawing funds from EPF accounts. In this article, we will gain insights from Sandeep Agrawal, Director and Founder of Teamlease Regtech, about EPF withdrawal rules, taxation, and TDS applicability.
Also read: Will Rs 7.5 lakh income be tax-free for senior citizens under Old Tax Regime in upcoming Union Budget? Here’s what finance ministry says
EPF withdrawal rules:
EPF allows employees to withdraw their accumulated corpus under various circumstances:
Retirement: Employees can make a full EPF withdrawal upon retirement after reaching 58 years of age.
Partial Withdrawals: Partial withdrawals are allowed under certain conditions, including:
Marriage: “An account holder can withdraw up to 50% of their own contribution to cover marriage expenses. This applies to their marriage or that of their children, siblings, or other eligible dependents, provided the account holder has contributed to PF for at least 7 years,” says Sandeep Agrawal.
Unemployment: “Account holders can withdraw 75% of the accumulated amount after 1 month of unemployment. If unemployment extends beyond 2 months, the remaining 25% can also be withdrawn,” explains Agrawal.
Medical Emergencies: “Employees can withdraw up to six months’ basic wages plus dearness allowance or their contribution with interest, whichever is lower, to cover urgent medical treatments for themselves or family members.”
Education: “For higher education or a child’s education after class 10, account holders may withdraw up to 50% of their contributions, provided they have completed 7 years of contributions.”
Home Renovation: “EPF rules allow withdrawals of up to 12 months’ basic wages plus dearness allowance, or the employee’s contribution with interest, whichever is lower, for home improvement. This can be availed twice—once 5 years after construction and again after 10 years from the first withdrawal,” shares Agrawal.
» Read More
