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PAN Card Holders Must Comply with The New PF Withdrawal Rule When Filing Their Income Tax Returns

By The Assam Tribune
PAN Card Holders Must Comply with The New PF Withdrawal Rule When Filing Their Income Tax Returns
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The Employee Provident Fund (EPF), often simply known as the Provident Fund (PF) scheme, is a government-backed retirement savings scheme. It facilitates long-term investments and helps people from all walks of life build a sufficient retirement corpus by the time they retire.

If you have a PF account too, and if you’ve been contributing to it regularly, you may have accumulated a sizable corpus by now. This balance can not only be useful for your post-retirement needs, but can also be withdrawn in case of a financial emergency.

Income Tax on PF Withdrawal

If you withdraw some money from your PF account balance before the completion of 5 years from the account opening date, the amount withdrawn is taxable. This is applicable on withdrawals exceeding ₹50,000.

So, for instance, say you have opened your EPF account on April 1, 2020. In that case, any withdrawals from your PF account exceeding ₹50,000 made between April 1, 2020 and April 1, 2025 will be subject to TDS. The rate of tax deduction depends on whether or not you have completed the PAN card verification and linked your PAN to your PF account.

As is the case with most government schemes, if you have completed the PAN card verification process, the rate of tax deduction will be lower. So, if you have not linked your PAN with your PF account, it is best to do this promptly. Furthermore, if you have lost or misplaced your PAN, you can apply for a duplicate PAN card online and then proceed to furnish your PAN details in your PF account.

Rate of Tax Deduction on PF Withdrawals

The rates of TDS on premature withdrawals from your PF account are as follows:

  • If PAN card verification has been done: 10%
  • If PAN card verification is not done: 30%

New PF Withdrawal Rules w.r.t TDS Rates

Finance Minister Nirmala Sitharaman has proposed a reduction in the TDS rate for account holders who have not furnished their PAN. The proposal suggests that the tax deduction rate be reduced from 30% to 20% for non-PAN PF withdrawal cases, bringing it on par with other non-PAN TDS rates.

The new and reduced tax deduction rate of 20% for non-PAN cases will be effective from the beginning of fiscal year 2024, i.e. from April 1, 2o23. This is certainly a relief for PF account holders who have not linked their PAN with their PF accounts. However, to truly enjoy low TDS rates, it is best to complete the PAN card verification process sooner than later.

When is Tax Not Deducted on PF Withdrawals

While tax is deducted at the above-mentioned rates for PAN and non-PAN cases, there are some scenarios where TDS is not applicable. Check these out below.

  • Transfer of funds from one PF account to another
  • Withdrawal from PF account after a period of 5 years from the date of account opening
  • Withdrawals made after the account holder has submitted Form 15G or 15H as well as the PAN details

How to Link PAN with PF Account

Want to withdraw funds from your PF account before the completion of 5 years, but want to reduce the tax burden? In that case, you need to link your PAN and your PF account. Here is a step-by-step guide to complete this PAN verification process.

Step 1: Log into the EPFO portal using your UAN and password.

Step 2: Select ‘Manage’ from the main menu and then click on ‘KYC.’

Step 3: On the new KYC page displayed, you will see a list of documents that can be updated. Click on the ‘PAN’ option.

Step 4: In the relevant fields, enter your PAN and your name as on your PAN card.

Step 5: Click on ‘Save’ and wait for the KYC approval to be completed.

Once your PAN is verified, it will automatically be linked to your EPF account. If you do not have your PAN for any reason like loss or theft of your PAN card, you can apply for a duplicate PAN card online before completing the PF and PAN linking process. Ensure that you do this on time, so you can enjoy tax deduction at a relatively lower rate of 10%.

Conclusion

Now that you know the rates of TDS for different scenarios, it is best to complete your PAN card verification. It is also advisable to link the details of your PAN to your Provident Fund account. This way, you can enjoy lower TDS rates if you need to withdraw a portion of your PF account balance before the completion of 5 years from the account opening.

Also, if you’ve lost or misplaced your PAN card, you can always apply for a duplicate PAN card online. Once that’s taken care of, you can proceed to submit the details of your PAN and link it with your PF account to lower the TDS rate to 10%.



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