The Employees’ Provident Fund (EPF) is an important retirement savings scheme, but there are fixed rules for withdrawing money. Employees can withdraw their PF fully or partly during retirement, unemployment, or emergencies like medical treatment, marriage, or buying a house. PF withdrawals are taxable. The main question is when tax applies and how much tax is charged.
What are the rules for PF withdrawals?
- An employee can withdraw the full EPF amount after retirement. The EPFO has fixed the retirement age at 55 years.
- An employee can withdraw 90% of the EPF amount at the age of 54, one year before retirement.
- An employee can withdraw 75% of the EPF amount after one month of unemployment. The remaining amount will be transferred to the PF account of the new employer.
- An employee can withdraw the full EPF amount after two months of unemployment.
- EPF funds can be withdrawn without the employer’s physical consent if Aadhaar is linked with the UAN and the employer approves it online.
TDS is deducted when you withdraw PF
When you withdraw money from your Provident Fund (PF) before completing 5 years of service, the government deducts TDS from your amount. This is why you may see less money in your account after withdrawal.
TDS is a system where the government collects tax at the time you receive income. So when you get salary, interest, rent, or payment for services, the payer deducts a small part as tax before giving you the money.
Are PF withdrawals up to ₹50,000 tax-free?
If you withdraw EPF before completing 5 years of continuous service, the withdrawal becomes taxable. But if the amount is less than ₹50,000, no TDS is deducted.
Your service with your previous employer also counts toward completing 5 years. If you transfer your EPF balance from your old employer to your new employer and your total service becomes 5 years or more, you don’t have to pay TDS.
You can check the TDS amount in your Form 26AS and claim it when you file your Income Tax Return (ITR). If the PF office deducted extra TDS and your total income is below the tax limit, you can claim a refund in your return.