TDS on Employee Provident Fund or EPF withdrawals – Section 192A

In order to discourage premature withdrawals from employee provident fund, government has introduced section 192A in finance act 2015. As per this section, TDS amount has to be deducted out of the withdrawals from employee provident fund or EPF if certain conditions are satisfied.

Employee provident fund withdrawals are taxable in India if the employee doesn’t render continuous services for a period of at least 5 years. While calculating 5 years of continuous service, time spent in previous employments is to be included if EPF with earlier employers is transferred to present employer.

If total period of service is less than 5 years, then entire withdrawals will be taxable in the financial year in which such withdrawn has taken place.

The persons responsible for deduction, is required to deduct tax at the time of payment of the accumulated EPF balance if conditions to TDS Under Section 192A is satisfied.

In this article we will be discussing provisions of section 192A to understand tax implication on premature withdrawal from EPF account or applicability of TDS on employee provident fund or EPF withdrawal.

TDS on Employee Provident Fund or EPF withdrawals

Rate of TDS and time of deduction

As per section 192A, from 1st of June 2015, withdrawals from EPF account exceeding Rs 30,000 will be tax deductible at the rate of 10% or the maximum marginal rate (i.e. 34.608%) if employee leaving EPF before completing 5 years of service. In Budget 2016-17 this limit has been increased from Rs 30, 000 to Rs 50, 000 with effect from the 1st day of June, 2016. Therefore, U/s 192A, tax at present to be deducted is at the rate of 10% on the amount withdrawn from employee provident fund account.

Higher rate of TDS U/s 192A

As per the provisions of Section 206AA of the Income Tax Act 1961, tax has to be deducted at the rate of 20% in case employee has not furnished PAN. Section 206AA is applicable in normal cases.

However, in case of EPF withdrawal, if employee does not have PAN or not furnished PAN to EPFS then tax will be deducted at the maximum marginal rate (i.e. 34.608%) from the provident fund account balances at the time of withdrawal.

When tax not to be deducted U/s 192A from EPF withdrawals

From above discussion, we know that no tax should be deducted out of withdrawals from employee provident fund if the amount withdrawn is less than equal to Rs. 50,000.

If the person withdrawing the amount out of EPF has submitted form 15G or 15H based on his age, then TDS is not deducted. You can submit these forms only when after considering the withdrawals, you are not liable to tax. Form 15H is submitted by senior citizens and 15G is submitted by persons below the age of 60 years.

Based on the conditions of section 192A and other provisions of tax law, in following cases you should not deduct tax from EPF withdrawals;

  • Transfer of employee provident fund balance from one employee provident fund account to another EPF A/c. This generally happened due to change of employer.
  • Balance in Employee Provident Fund account is withdrawn because of termination of service due to ill health of member, discontinuation or contraction of business by employer, completion of project or other cause beyond the control of the member.
  • Where employee withdraws from his or her EPF Account after a period of 5 years of continuous service, including service with previous employer.
  • If withdrawal from EPF account is less than Rs 50,000 and employer has rendered less than 5 years of continuous services.
  • In cases where member has submitted form 15G or 15H along with PAN even though employee’s withdrawal amount is more than or equal to Rs 50,000, with service less than 5 years.

Form 15G and 15H on withdrawal from Employee Provident Fund

There may be cases where the tax payable on the total income of the employees may be nil even after including the amount of premature withdrawal.

For this purpose government has extended the facility of filing self-declaration for non-deduction of tax under section 197A of the Act to the employees receiving premature withdrawal.

This means, an employee can give a declaration in Form No. 15G to the effect that his total income including taxable premature withdrawal from EPF Account does not exceed the maximum amount not chargeable to tax.

On furnishing of such declaration, no tax will be deducted by the trustee of EPFS while making the payment to such employee.

Similar facility of filing self-declaration in Form No. 15H for non-deduction of tax under section 197A of the Act has also been extended to the senior citizen employees receiving premature withdrawal.

Form No 15G and 15H cannot be accepted by the department if amount withdrawal is more than the basic exemption limit.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.

8 thoughts on “TDS on Employee Provident Fund or EPF withdrawals – Section 192A”

  1. Hi,
    I have withdrawn EPF from last employer. Amount is credited after deduction of TDS. I have received Form 16A for the same and it is reflected in Form 26AS. Now, my query is :
    -While filing income tax return for the FY 2015-16 should I mention PF amount in my taxable income (if yes; where)?
    -Because of this my slab rate has been changed and there is outstanding tax payable.
    -Both last and current employer has already been deducted TDS.

    Please guide!
    Thanks

  2. My case is the same as above. My claim for PF withdrawal was rejected due to non submission of Form No. 15G. But, I’m not eligible to submit the same. What shall I do?

  3. I left job in September, 2014. My PF application was rejected because form 15g was not attached. My PF amount is around 185000 and I am not working since I left my job. I have following questions.

    1. What do I need to mention in column 22 of the form 15g. I have no other sources of income.

    2. What is to be mentioned in column 23 ( total estimated income). Do I need to mention the entire PF amount I will be getting?

  4. I left job in January 2015 and currently not working anywhere. For filling from 15 g can u please clarify

    1. How will i know how much amount I will get from my PF.
    2. If this amount is know under which schedule i should put it in form 15g.

  5. Hello Abhi
    Thank you for the valuable information. I have a doubt, I wanted to withdraw my PF this month June 15. My pf amount is above Rs. 30000 (but less than Rs.2,50,000)and the maturity year is less than 5 years. I am currently earning Rs.42500 ctc/month for this financial yr (15-16). Last financial year also, i had a tax deduction of a small amount from my salary. My pf withdrawal application was rejected due to non submission of the FORM 15G and pan card copy. So what i wanted to know is,
    1. Is there an issue if i submit the Form 15G when i have a tax liability in my salary ??
    2.Wil i have a tax deduction from my pf amount, even after i submit the form 15g and pan card since i have TDS deduction( in this financial year also) from my salary?

    Thanks
    Jeena B

    1. You are getting 42500 per month, this means your income is above the basic exemption limit due to which you are liable to pay tax, you have also confirmed that your employer has deducted TDS from your salary.

      Form 15G and form 15H are two self declaration form which are submitted to bank or PF institution stating that you are not liable to tax during the financial year and tax is not required to be deducted from your interest income or withdrawal.

      As you are liable to tax for the financial year, you can not submit form 15G read this article https://yourfinancebook.com/form-15g-15h-bank-interest-tds/ , its written for bank interest but the logic is same.

      if you submit form 15G then PF department will not deduct TDS from your withdrawal. But it will be wrong from your part as you are liable to tax for the financial year.

      Have you asked PF department not to deduct TDS from your withdrawal?

      1. Hi Abhi
        The pf department rejected my application telling non submission of form 15G .So i submitted it. In the doc i haven’t mentioned any amount anywhere.

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