During the presentation of the Union Budget 2023, Finance Minister Nirmala Sitharaman made it clear that the rate of Tax Deducted at Source (TDS) on Employees’ Provident Fund (EPF) withdrawals for non-PAN instances would be reduced. In non-PAN cases, the government has now reduced the TDS rate on the taxable portion of EPF withdrawals from 30% to 20%.
It is anticipated that salaried individuals whose Personal Identification Number (PAN) has not been updated in the Employees Provident Fund Organization’s (EPFO) records will benefit from this reduction in the amount of tax deducted from EPF withdrawals.
If a PF account holder withdraws funds from their EPF prior to five years have passed since the account was opened, both the total amount of the withdrawal and any PF contributions exceeding Rs 2.5 lakh per year are subject to taxation under the income tax law.
Even if a tax on income from a previous year was paid in that year, it may sometimes be taken out later. An amendment was proposed to make it simpler for these taxpayers to request credit for this TDS in the previous year.
A higher TDS/TCS rate is in effect if the beneficiary is a non-filer—that is, he or she has not filed a return of income for the previous year and has paid at least Rs 50,000 in TDS and TCS.
After the EPFO has deducted the TDS, a certificate is issued to the taxpayer. To claim any refunds that may be due, one must include this TDS certificate with their Income Tax Return (ITR).
Notably, an EPF account holder can ensure that no TDS is deducted from withdrawals by submitting Forms 15H or 15G.
EPF withdrawals are subject to TDS within five years of opening the account.
If the PAN is on file with the EPFO, 10% of the withdrawal amount will be subject to TDS deduction. When the PAN was unavailable or not linked to the PF account, the TDS rate was 30%, but it is now 20%.
If you want to withdraw funds from an EPF account that is not linked to a PAN, you will need to wait until April 1, 2023, when the new requirements take effect for the upcoming fiscal year.
