TDS on your EPF withdrawal
For most salaried people the provident fund contribution constitute a major chunk of their tax savings under Section 80C of the Income Tax Act. But, there are few instances, when this long-standing and still preferred retirement contribution instrument levies income tax on members.
Early withdrawal: When the EPF balance is withdrawn before completion of five years of continuous service, TDS is deducted on the withdrawal. The way to calculate five years of service, the employment with previous employers is also included and considered. What this means is that if you transfer your EPF balance from past employers to the most current employer and your total employment this way is five years or more, no TDS is deducted. Do remember that you must calculate exact five years; there is no grace if you are short by even a few days.
Temporary positions: In case you have been hired for a temporary position or have a contracted employment and you are not on permanent rolls and the employer is not liable to contribute towards your EPF. After some time, you are brought on rolls and the employer starts deducting and contributing towards your EPF contribution. Now, you may resign after years of working for such an organisation, however, you may not have been a regular for all this time. In such cases, the employer will deduct TDS from your EPF withdrawal, because you have not completed the full five years on their rolls with PF contributions.
Unrecognised EPF: There are times when you may be contributing to a PF, but the fund may not have been approved by the Commissioner of Income Tax, and is considered an unrecognised provident fund. A fund to enjoy income tax benefits of a recognised provided fund must be approved by a commissioner of income tax. If you are a member of unrecognised provident fund, your withdrawals are taxed, whether or not you have completed 5 years of service. Our tip: It helps to check with your employer about the status of your EPF.
How EPF withdrawals are taxed?
To understand this, you need to understand the four components of the EPF – both your and the employer’s contributions and also the interest earned on both your and the employer’s contributions.
Your contributions: This portion of your withdrawal is not taxable. However, if you have claimed deduction under section 80C on your contribution in earlier years, you may have to pay additional tax as if 80C was not claimed by you for those years.
Interest on your contribution: This portion is taxed as income from other sources.
Employer’s contribution and interest on this contribution: The employer’s contribution and interest on it is fully taxable. It is taxed under the head salary in your tax return. When TDS is deducted on it, you are likely to see an entry under salary TDS in your Form 26AS for it.
You can claim relief under section 89(1) on these balances.
Applicable TDS Rates
- How to check EPF status and balance online
- NPS or EPF or both: What should I opt?
- Will my Provident Fund Savings not be Sufficient?
- Learn to Check EPFO Claim Status Online in Few Steps
Income Tax Slab 2021-22
February 17, 2020
Income Tax Return Guide - Details You Should Know
November 07, 2016
Best Tax Saving Investment Options in 2022 (FY 2022-2023)
November 08, 2016
Subscribe to get the latest articles directly in your inbox
14 Best Investment Options In India
October 30, 2018
Short Term Investments: Top 11 Short Term Investment Options For 2022
November 08, 2016
Insurance vs Investment - Did You Get the Right Financial Plan?
November 05, 2018
Popular & Recent Articles
How to Plan for Retirement as Per your Age
"The thumb rule for retirement planning is - the earlier you start, the more you save. However, with age, your priorities change too. So, you need to factor in the cost of living in the present vis- a -vis future."
HDFC Life Insurance Company Limited. CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101.
Registered Office: Lodha Excelus, 13th Floor, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011. Email: [email protected], Tel No: 1800-266-9777 (10 am to 7 pm). The name/letters “HDFC” in the name/logo of the company belongs to Housing Development Finance Corporation Limited (“HDFC Limited”) and is used by HDFC Life under an agreement entered into with HDFC Limited.
For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale.
|BEWARE OF SPURIOUS PHONE CALLS AND FICTIOUS/FRAUDULENT OFFERS
- term insurance plan
- savings plan
- ulip plan
- retirement plans
- health plans
- child insurance plans
- group insurance plans
- long term savings plan
- fixed maturity plan
- monthly income advantage plan
- income tax calculator
- pension calculator
- bmi calculator
- compound interest calculator
- term insurance calculator
- income tax
- tax saving investment options
- best investment plans
- benefits of term insurance calculator
- what is term insurance
- why to invest in life insurance
- tax planning for salaried employees
- how to choose best child insurance plan
- tips for buying retirement plan
- 1 crore term insurance
- importance of saving
- short term saving plans
- types of investment in india
- investment declaration