The Employees Provident Fund is a savings scheme introduced to mobilise money and build a retirement corpus. While it allows individuals to save money, the same is taxed under Section 192A of Income Tax Act. Nonetheless, there are certain deductions that individuals can avail of to maximise their benefits from EPF. To streamline the process in a hassle-free manner, individuals need to find out more about the provisions under the purview of this tax regime.
Section 192A of Income Tax Act is concerned with the TDS on premature withdrawal from EPF. It directs the Employees’ Provident Fund Scheme, 1952 to deduct TDS when employees do not meet the provisions mentioned under Rule 8, Part A of Fourth Schedule.
One must note that this provision was recently added to the Income Tax Act, 1961 under the purview of Finance Act, 2015. Per this provision, tax is essentially deducted during the time of payment.
Entrusted deductors are required to deposit TDS with the government within a week of the following month in which tax is deducted at source. However, when it comes to TDS deducted in March, it is to be deposited either on or before the 30th of April.
Notably, TDS deductors have to file quarterly returns through Form 26Q on these dates –
|Payment of quarter||Payment due date|
|April to June||31st of July|
|July to September||31st of October|
|October to December||31st of January|
|January to March||31st of May|
Under TDS Section 192A the entrusted entity deducts tax at source at the rate of 10%. However, one must note that if an employee is unable to provide PAN, then the entrusted entity deducts TDS at the marginal rate, i.e. 34.608%.
Besides learning the TDS rate on PF withdrawal, individuals need to find out about the deduction limit to avail the same.
TDS is deducted when the total amount of a lump sum tax component is more than Rs. 50000. Nonetheless, there are a few circumstances during which TDS is not deducted under Section 192A TDS. Entities must find out about the exceptions in advance to account for it.
These pointers enumerate the circumstances under which tax is not deducted under Section 192A of Income Tax Act.
One must note that PAN’s submission is not mandatory when the PF account holder has served more than 5 years in an organisation. This further eliminates the need to submit Form 15G or Form 15H.
Also, PF holders who had been terminated from their service due to ill-health or discontinuation of business or completion of their project, do not have to submit PAN. It is because their earnings will not be subject to TDS.
According to the provisions included in 192A TDS Section, the tax will be deducted at source if the total balance exceeds Rs. 30000 at the time of withdrawal. The same will also be applicable if the account holder has been associated with an organisation for less than 5 years.
TDS will be deducted on the provident fund balance when paid out to the concerned employee.
These pointers below highlight the situations under which tax will be deducted at source on provident fund withdrawals –
Other than these, this provision is also applicable if an individual’s PF withdrawal is lower than Rs. 30000 and he/she has served for less than 5 years in an organisation.
Nevertheless, individuals with a PF account must make it a point to become aware of the Section 192A of Income Tax Act and its implications in detail. Doing so, they will be able to streamline the withdrawal process and learn how to lower accompanying TDS on them successfully.