EPFO Update – You’ll Get the Full PF Amount in Hand, Just Know This Useful Trick”

New Delhi: If a portion of your salary is deposited into a PF (Provident Fund) account while you are employed, there are certain essential details you should be aware of. Did you know that the money in your PF account is not entirely tax-free? If you withdraw funds after serving for less than five years—and the withdrawal amount exceeds ₹50,000—it becomes subject to taxation.

It is important to understand that, even with an investment tenure of less than five years, it is possible to make a withdrawal without incurring any tax liability. You need not harbour any confusion regarding this matter; by familiarising yourself with the precise rules, you can eliminate any doubts.

Key Facts You Should Know About PF

Employees often assume they will receive a substantial lump sum when they decide to withdraw their PF funds. However, making a withdrawal without proper preparation increases the risk of tax deductions. Many people are unaware that TDS (Tax Deducted at Source) is applicable to PF withdrawals as well. Nevertheless, by understanding the correct regulations, you can take steps to avoid this tax. Generally, PF withdrawals are entirely tax-free only if you have completed a minimum of five years of service.

If you switch jobs, it is crucial to transfer your old PF balance to your new account; otherwise, it will be subject to taxation. Not every PF withdrawal attracts a tax liability; TDS is not deducted on amounts up to ₹50,000. However, for withdrawals exceeding this limit—and made after less than five years of service—tax provisions come into effect.

When is 10% TDS Deducted?

If you are withdrawing an amount exceeding ₹50,000 before completing five years of service, you can save on taxes by submitting Form 15G or Form 15H. By submitting these forms, you declare that your total annual income falls below the taxable threshold; otherwise, a 10% TDS will be deducted. The most significant financial loss occurs when your PAN card is not linked to your UAN (Universal Account Number).

In such instances, instead of the standard 10%, a TDS of 20% may be deducted directly. Therefore, it is imperative to keep your KYC details updated. Furthermore, making frequent withdrawals from your PF account is generally ill-advised, as doing so diminishes your accumulated retirement savings. It is also subject to tax. The smart strategy is to keep transferring your PF balance so that the five-year tenure is completed, allowing you to receive the funds tax-free.