EPFO 3.0: The Employees’ Provident Fund Organization (EPFO) is on the verge of launching EPFO 3.0. This initiative promises to be a groundbreaking transformation for PF subscribers. With this upgrade, you will no longer need to wait for weeks to access your PF balance; instead, you can withdraw cash directly using your ATM card.
How will the PF ATM function?
Experts suggest that EPFO 3.0 is designed to provide subscribers with greater control over their finances:
Use like a debit card: The ATM card issued for your PF can function just like a regular bank debit card.
Withdrawal up to 75%: In emergencies such as medical expenses, home construction, or unemployment, you will have the option to withdraw up to 75% of your total PF balance immediately.
Possible limit: Although we are still waiting for official confirmation, it is anticipated that withdrawals of up to Rs 1 to 2 lakh may be permitted at once.
While convenience will improve, tax regulations will remain unchanged.
Even though this new update may simplify the process of withdrawing PF funds, taxes will still be applied according to the previous rules. This is contingent on your duration of service:
After 5 years: If you have completed 5 years of continuous service (including PF transfers from previous employers), your PF withdrawal will be entirely tax-free.
Before 5 years: If you withdraw funds before reaching 5 years of service, the amount will be added to your total income for that year and taxed according to your applicable tax bracket.
Complete calculation for withdrawal before 5 years
For instance, if you withdraw Rs 2 lakh after 3 years of service, here’s what will occur:
TDS deduction: If you provide your PAN, a TDS of 10%, or Rs 20,000, will be deducted at the time of withdrawal. You will receive Rs 1.8 lakh in cash. This Rs 2 lakh will be included in your total income at the end of the year. If you fall into the 20% tax bracket, your total tax liability will be Rs 40,000. Since Rs 20,000 has already been deducted, you will need to pay an additional Rs 20,000.
Withdrawal of 80C benefit: The tax exemption you claimed under Section 80C during your employment will also be revoked. The most important thing is that if you don’t submit your PAN card, the TDS rate can increase from 10% to 34.608%. Therefore, it’s crucial to provide your PAN and Form 15G/15H (if applicable) when withdrawing PF.
