Making partial money-withdrawal from one’s EPF account has become a piece of cake ever since the Employees’ Provident Fund Organisation (EPFO) has changed PF withdrawal rules. Owing to the change in rules, subscribers can now make a partial withdrawal request from their EPF account online.
Also, EPFO had earlier notified that on leaving a so and so job, an employee can withdraw up to 75% of his/her cumulative EPF corpus within a month. However, if one is unemployed for over two months, s/he can withdraw the whole 100% of EPF balance.
However, there are certain facts that one must be aware of before considering withdrawal from their EPF account.
- Withdrawal from the EPF account will be taxed if money is withdrawn from the EPF account before the completion of the service period i.e. five years.
- Moreover, in case if you have transferred your EPF account from a previous employer, the previous employment duration will also be added to your present employment duration to calculate the total employment duration.
- So now, all together, if the overall employment time period is less than five years, then the amount withdrawn will be taxed.
- If you don’t know this yet, the amount in one’s EPF account is divided into 4 distinct parts – employee contribution, employer contribution and interest received on both the contribution.
- Now in case if your continuous employment duration is less than five years, then, the employer’s contribution and interest on the same, both are taxable in the income tax return of the subscriber under the category ‘income’.
- An employees’ share of contribution is taxable under the head ‘salary’ if withdrawal is made before completion of five years.
- If the withdrawal is made prior to five years, the interest received on employees’ share of contribution is taxable under the head of ‘income from other sources’.
- Moreover, a 10% TDS will also be imposed on withdrawal made before the completion of five years.
- But if the PF balance is less than Rs 50,000 or in any case the company has shut, then TDS will not be deducted.
- You can opt Form 15G/15H to avoid TDS on EPF withdrawal.
PF subscribers don’t usually withdraw money from their EPF account as the interest that the government gives on the same is usually very high.