The EPF is applicable to any firm that has 20 or more employees anywhere in India. It offers the most secure and one of the longest-term multiplication of savings from the salary of an employee. It consists of both a lump sum and a monthly pension (that is now awaiting a round of upward revision). While the EPF has been designed for maximum wealth generation that is to be handed over to an employee at the time of retirement at the age of 58 or 60, there are provisions for an employee to withdraw funds from the EPF account before superannuation.
Money from the EPF can be withdrawn if an employee retires, resigns from service and if any emergency situation arises. Rules state that if a person resigns from service before the age of retirement, he/she has to wait for 60 days to withdraw the amount in the EPF account. Usually, the withdrawals are free from Tax Deducted at Source (TDS). However, in certain situations, TDS becomes applicable. Let’s find out which are the conditions where TDS is slapped on the withdrawals.
Less than 5 years of service
The rules (Form number 19) state that “if an employee withdraws amount more than or equal to Rs 30,000 with service less than 5 years, then a) TDS will be deducted @10% if Form -15G/15H is not submitted provided PAN is submitted b) TDS will be deducted @ maximum marginal rate (ie, 34.608%) if an employee fails to submit PAN.
The tax will be deducted from the amount that is to be paid to the employee at the time of transferring the funds into his/her designated bank account. The TDS will be deducted under Section 192A of the Income Tax Act 1961.
No TDS in these cases
The rules also state that no TDS will be applicable to instances where funds are transferred from one account to another, money is transferred to the employee’s bank account after he/she has applied for an advance. The employee will also face no TDS if he/she faces termination by the employer.
The Employees’ Provident Fund (EPF) is one of the earliest welfare schemes for employees of India that was legislated in 1952, a mere 26 months after the Constitution was adopted. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
