TDS@10% is deductible if an employee withdraws Provident Fund amount equal to or more than Rs. 50,000.
Provident Fund is managed by the PF commissioner and at the time of retirement, employees get payment from the trustees of Employees Provident Fund Scheme (EPFS). This provident fund is known as recognised provident fund (RPF).
Withdrawal of accumulated balance at the time of retirement or at the time of leaving job
Withdrawal of accumulated balance by an employee from the RPF is exempt in the hands of employee in the following situations:
- If the employee has rendered continuous service with his employer for a period of 5 years or more. For the purpose of calculating 5 year time limit, service rendered with the previous employer shall be included if the previous employer also maintained recognized provident fund and the PF balance of the employee was transferred by him to the current employer
- If the employee has been terminated because of certain reasons which are beyond his control (e.g. ill-health of the employee, discontinuance of business by employer, completion of project for which the employee was employed etc.)
- If the employee has resigned before completion of 5 years but has joined another employer (who maintains RPF and the PF amount with the current employer is transferred to the new employer)
- If the entire balance standing to the credit of the employee is transferred to his account under a pension scheme referred to in section 80CCD and notified by the central government (i.e. NPS)
If an employee makes withdrawal before continuous service of 5 years (other than the cases given above), such withdrawal shall be treated as withdrawal from unrecognized provident fund (URPF). URPF withdrawal (excluding employees contribution) is taxable (hereinafter referred to as “taxable premature withdrawal”).
Taxable Amount
Tax is deductible from “taxable premature withdrawal” i.e. from accumulated sum payment. Out of lumpsum payment, only amount includible in the total income of the employee is subject to TDS.
Time of Tax Deduction
Tax is deductible at the time of payment.
Rate of TDS
Rate is 10%. If recipient is a resident, surcharge/health and education cess are not applicable. If recipient is non-resident, the rate of 10% increased by surcharge and health and education cess.
If PAN of recipient is not available, tax is deductible at the maximum marginal rate of tax.
Threshold limit for tax deduction
Tax is not deductible if “taxable premature withdrawal” is less than Rs.50,000.
Is it possible to get lower TDS certificate u/s 197
Lower TDS certificate cannot be obtained to get payment without TDS or lower TDS by submitting Form No. 13 to the Assessing Officer.
Is it possible to avoid TDS by submitting Form No. 15G/15H u/s 197A
An employee can submit a declaration in Form No.15G/Form 15H to the effect that his total income including taxable premature withdrawal from provident fund does not exceed the maximum amount not chargeable to tax.
Form 15CA/15CB for remittance outside India
In case NRI employee wishes to transfer proceeds outside India then he is required to obtain Form 15CA/15CB as required.
Also Read: E-Commerce operator and Tax implications
Also Read: Income Tax on F&O and Intraday Trading
Also Read: Tax on NRI for sale of Immovable Property in India
Like Us On Facebook
