Tax on EPF Withdrawal: People prefer to keep their savings in Employees’ Provident Fund (EPF) as the money is safe in it and at the same time it also gives higher returns than PPF, Fixed Deposit etc. The best thing about EPF is that investors get tax exemption in this. Experts recommend that employees should not withdraw PF amount before retirement. People investing in EPF can avail tax benefits under section 80C. However, the point to note here is that if you are making partial withdrawal or full withdrawal before maturity, then EPF withdrawal is taxable. Here we have told about the rules related to tax liability on withdrawing money from EPF account.
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Rules related to tax liability on EPF withdrawal
- If you withdraw money from EPF before completing 5 consecutive years of service, then TDS will be deducted. Here it is not necessary to complete the period of five years in the same company.
- Suppose you are working on a temporary post in a company for a certain period of time and your company is not putting money in your EPF. After this you become permanent in the company and your company starts putting money in EPF. Now if you resign after completing five years and withdraw money from your PF account, TDS will also be deducted. This is because you have not worked in the company permanently for five full years.
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- To avail income tax benefits, a fund needs to be approved by the Income Tax Commissioner. If this is not done then it is treated as an unrecognized provident fund.
- If the amount withdrawn from PF account is less than Rs 50,000, then TDS will not be deducted. But if you fall under the taxable bracket, then you have to show the EPF withdrawal in your ITR.
- If you withdraw more than Rs 50,000 from your PF account before the completion of 5 years, then 10 percent TDS will be deducted on giving PAN, while no TDS will be deducted if Form 15G/15H is given.
- No TDS will be deducted on transfer of PF from one account to another on change of job. Along with this, you do not even need to mention it in the income tax return file, as it does not come under the purview of tax.
(Input- Cleartax.in)
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