EPFO Rules: Is Your PF Account Taxed? Know When TDS Is Applied On Withdrawal From EPF Account

Employees provident fund (EPF) account is one of the major retirement savings account that is regulated by the Employees' Provident Fund Organisation (EPFO). EPF account is mandatory, requiring both employers and employees to contribute a certain percentage of basic salary. For instance, a salaried employee contributes 12% of their basic pay, while an employer adds 3.67% of the employee's basic salary. The rules and process for withdrawal from EPF account is also easy and seamless. However, a tax deducted at source (TDS) is imposed if your withdrawal is pre-mature. Let's understand what is the TDS rate and when it is applied while removing money from your PF account.

Is There Any Tax On PF Withdrawal?

Yes! This is called tax deducted at source (TDS). The Section 192A which is now merged with Section 392, was introduced to mandate that EPFO deduct tax at source on premature EPF withdrawal on specified threshold. The intent was to discourage any early withdrawal and bring untaxed payouts within the income tax framework.

When TDS Is Applied On EPF Withdrawal?

TDS is deducted if the salaried individual has served less than 5 years in a company and withdraws an amount equal or above Rs 50,000 from their EPF account

TDS Rates On EPF Withdrawal:

If your withdrawal is above Rs 50,000 in less than 5 years, TDS rate is 10% where a valid PAN furnished. In the absence of PAN, the deduction is levied at the maximum marginal rate of 34.608% making PAN linkage non negotiable of every EPF member.

When TDS Is Not Deducted?

If the service continues for more than 5 years, then the withdrawal is fully exempt, or in case of withdrawal below Rs.50,000, the amount will not no TDS deduction. Transfer of EPF to a new employer is not treated as a withdrawal, so no TDS is deducted.

Similarly, withdrawals made due to specified reasons such as ill health, closure of the employer's business, or completion of a project are exempt from TDS.

Additionally, individuals below 60 years can submit Form 15G, while senior citizens can submit Form 15H to avoid TDS deduction, provided their total annual income, including the EPF withdrawal, remains below the basic exemption limit. However, it is crucial to ensure eligibility before submitting these forms, as making a false declaration is considered an offence punishable under the Income Tax Act.

Condition	TDS Status	Notes
Continuous service more than 5 years	✅ No TDS	Withdrawal is fully exempt
Withdrawal below ₹50,000	✅ No TDS	No TDS deduction due to threshold exemption
EPF transfer to new employer	✅ No TDS	Not treated as a withdrawal
Withdrawal due to ill health	✅ No TDS	Exempt category
Withdrawal due to closure of employer's business	✅ No TDS	Exempt category
Withdrawal due to completion of project	✅ No TDS	Exempt category
Below 60 years + Form 15G + total annual income within exemption limit	⚠️ Can avoid TDS	Eligibility conditions must be met
Senior citizen + Form 15H + total annual income within exemption limit	⚠️ Can avoid TDS	Eligibility conditions must be met

ROLE OF THE EPF PASSBOOK AND UAN PASSBOOK

Before raising a withdrawal claim, every member must verify their service period and current balance. The EPFO Member Portal provides access to the EPF Passbook and UAN Passbook , which contain a month wise record of employee and employer contributions, interest credits , advances previously drawn and closing balance

The Provident Passbook is the most reliable document to establish service continuity , a factor that directly determines TDS applicability. Members who switched employers should ensure their PF has been transferred not withdrawn to maintain an unbroken service record.

KEY COMPLIANCE CHECKLIST

• Link PAN and UAN before raising any withdrawal request
• Access your UAN passbook to confirm service duration and balance
• Submit Form 15G or 15H if your total income qualifies
• Transfer the credit amount , do not withdraw while changing jobs
• File your ITR to claim a refund on excess TDS, if applicable