EPF Withdraw Rules : The purpose of EPF is to create a large retirement fund. Upon retirement, an employee receives a lump sum of the money deposited in the EPF. If the employee’s service period exceeds 10 years, they are also eligible for a pension. Employees in private jobs also benefit from EPF. The tax rules related to EPF make it quite attractive. The lump sum received upon retirement is not taxable. The question is, will the employee withdraw the money before retirement under certain circumstances be taxed?
Experts say that EPF deposits are made in three ways. First, a portion of the employee’s salary (12 percent of the basic salary plus DA) is deposited into the account every month. Second, the employer also deposits an equal amount into the employee’s EPF account every month. Third, the money deposited in the EPF account earns annual interest. The government sets the interest rate each year. In FY25, this interest rate was 8.25 percent.
Tax on withdrawal if service is less than 5 years
If an employee withdraws EPF funds before completing five consecutive years of service, they will be taxable on the amount. However, if the amount is less than Rs 50,000, TDS will not be deducted. If a person transfers EPF deposits from a previous employer to a new employer with a total service period of five years or more, TDS will not be deducted. Many times, when employees change jobs, they do not transfer their EPF balance with the previous employer to the new employer. They simply withdraw the EPF deposits. Since it is a retirement fund, withdrawal from it is not in the employee’s interest.
Tax rules on withdrawal
If the employee has not completed five years of service and the EPF amount exceeds Rs 50,000, TDS is deducted at the rate of 10%. The employee must provide their PAN details during the withdrawal process. If PAN details are not available, TDS is deducted at the rate of 20% on the EPF amount. If the employee’s income is not taxable, they can submit Form 15G/Form H. This will prevent TDS from being deducted on the EPF amount.
