New EPFO Rule: PF Withdrawal Before 5 Years Will Attract Tax

Tax Deduction at Source (TDS) was proposed to be reduced to 20 per cent from the existing rate of 30 per cent, as informed by Finance Minister Nirmala Sitharaman while announcing the Union Budget 2023. It will be applicable on the taxable part of the Employees Provident Fund Scheme, for the non-PAN cases. Apart from this change, all the other income tax provisions will remain the same.

New EPFO Rule PF Withdrawal Before 5 Years Will Attract Tax

EPFO New PF Rule

So, as per the new income tax rule informed by FM Nirmala Sitharaman, if a PF account holder withdraws his or her accumulated PF amount before 5 years from the date of opening that the amount withdrawn will be taxable and the PF contributions will also remain taxable up to ₹2.5 lahks per annum.

“At present, the TDS rate on withdrawal of taxable components from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases,” said Nirmala Sitharaman while delivering the budget 2023-24 speech in the parliament.

To make it easier to understand the new EPFO rule for the non-PAN user accounts, Mr Balwant Jain, a tax expert said, “PF withdrawal is taxable if the withdrawal takes place before five years of PF or EPF account opening. If the PF account is seeded with the account holder’s PAN card, then there will be no TDS levied on the withdrawal amount. PF withdrawal amount will be added to the total taxable income of the PF account holder in the year of withdrawal and the tax will become applicable based on income tax slab getting applicable on the PF account holder.”

Also read:

New Income Tax Slab 2023-24 For Senior Citizen Vs Old, Which Will Follow This Year?

But, Mr Balwant also said if the PF account is linked with PAN Card then, “TDS is deducted from the net amount available in one’s PF account. This TDS rate is currently 30 per cent of the PF withdrawal amount, which will come down to 20 per cent from 1st April 2023 or the beginning of FY24.”

Rishabh Sharma

Rishabh is an experienced content writer and editor, he is working for Viralbake to cover a diversified range of categories. His articles mainly focus on providing information, being a travel guide, educating others, and also making people aware of technology, after all, he is a technophile. When not writing he can be found gaming, watching movies, and travelling.

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