New PF withdrawal rule: In this year’s Budget statement, Finance Minister Nirmala Sitharaman said that the government would bring down the Tax Deduction at Source (TDS) from 30 per cent to 20 per cent for the taxable component of the Employees' Provident Fund (EPF) Scheme for non-PAN cases.
As per the tweaked rule, if an individual wants to withdraw his EPF amount before the completion of 5 years of account opening, then he or she has to pay tax on the whole withdrawn amount. Besides, PF contributions above Rs 2.5 lakh per annum would also be taxable. Other income tax rules will remain the same.
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While reading out the Budget statement, Sitharaman said: “At present, the TDS rate on withdrawal of taxable component from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases." Therefore from now on, if an EPF or PF account holder withdraws his PF funds, it would be taxable if the withdrawal is done before five years of account opening.
Also, if the account holder’s PF account is linked with his/her PAN card, then no tax would be levied on the amount withdrawn. Therefore, PAN cardholders will get an exemption, while non-PAN holders will have to pay this extra tax. But the good news is, from next fiscal (April 1, 2023), the 30 per cent TDS on this amount will come down to 20 per cent.
So, filing the Income Tax Return (ITR) for a particular fiscal, this amount would be added to the total taxable income, and tax will be calculated as per the applicable income tax slab.
However, if the PF account is linked with the PAN card, the applicable TDS would be deducted from the net amount available in the PF account.
Watch: Why Are Individuals Being Taxed More Than Corporates?
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