• Notification Date: 08-03-2022
• Notification No: N/A

Rules to Note about Employee Provident Fund

An important notification has been declared by the Employee Provident Fund Organization (EPFO) last month. The notice specifies the liabilities about the tax deducted at source (TDS) which is necessary for all the members to be aware of.

Employee Provident Fund (EPF) is a government retirement scheme. It was introduced with the purpose of providing financial support to individuals after retirement. Any person who has invested in the scheme is entitled to withdraw money after their retirement at the age of 60 years. If an individual wants to withdraw money from the provident fund account before retirement, they are eligible to do so, but they have to fulfil a few conditions. The individual needs to follow a few guidelines so that there are no hassles or issues in the process.

There are several tax rules in the Employee Provident Fund scheme for withdrawing money from the account. If an employee withdraws money before completing five years of service, they will be subjected to a tax deducted at source (TDS).

The Government has announced a new rule regarding tax deductions. The new rules are effective from 1 April 2022. The revised guidelines state that the interest available from the EPF deposits of more than Rs.2.5 lakhs will be subjected to taxation. At present, the employees having an EPF account are receiving an interest of 8.5 per cent on their deposits.

TDS Liabilities on EPF

1)  If an individual withdraws money before a minimum of 5 years of service, TDS will be charged at the rate of 10 per cent on the amount, provided the amount is more than Rs.50,000. There will be no TDS charges applicable on the withdrawn amount if the person submits Form 15G/15H along with the PAN Card.

2) After completing 5 years of service, there will be no tax imposed on the amount withdrawn by an individual from their EPF account.

3) The term ‘permanent employee’ holds primary importance here. If an employee joins on a probationary period or on a contractual basis for a year and serves for four years in the company as a permanent employee, then the individual will attract TDS on their EPF amount withdrawals.

4) If an employee falls ill or the company gets dissolved, money can be deducted from the EPF account before serving a period of 5 years. Under these special circumstances, there will be no TDS charged on the withdrawn amount.

If the employee has initially forgotten to submit their PAN details, TDS will be charged on the withdrawn EPF amount at a very marginal rate of 34.606 per cent.