Online Procedure for Withdrawing PF: A Guide to Making PF Withdrawals Using UAN Digitally
The Employees' Provident Fund (EPF) is a mandatory retirement savings fund for eligible employees in India. Here's a breakdown of the key rules and tax exemptions associated with EPF withdrawals.
EPF Withdrawal Rules
Permitted Withdrawals
Partial withdrawal of EPF funds is permitted for medical emergencies, home acquisition or construction, higher education, or marriage purposes. After retirement, employees can withdraw the total amount accumulated in their EPF account.
Unemployment Withdrawals
If you are unemployed for at least a month, you can withdraw up to 75% of your funds. You can withdraw the remaining balance if you are unemployed for two months or longer.
Contributions and Interest
Employees contribute 12% of their basic salary to the EPF each month, and employers contribute a matching amount. Funds deposited in the EPF accounts earn interest yearly.
Premature Withdrawals
Under certain circumstances, employees can make premature withdrawals from their EPF account. However, if you withdraw your EPF corpus prematurely, tax is deducted at source, but no TDS is deducted if the amount is less than Rs. 50,000.
Special Withdrawals for Disabled Account Holders
Specially-abled account holders can withdraw 6 months of basic wage along with a dearness allowance or employee share with interest (whichever is less) to pay for the equipment cost.
Purchasing Land or Prefabricated Houses
The PF withdrawal rules allow the account holder to make a premature withdrawal to purchase empty land or prefabricated houses.
Tax Exemptions on EPF Withdrawal
After 5 Continuous Years of Service
To qualify for tax exemption on EPF withdrawal, the primary condition is that the employee must have completed 5 continuous years of service. If the EPF amount is withdrawn after this period, it is fully exempt from income tax and no TDS (Tax Deducted at Source) applies.
Withdrawal before 5 Years of Service
Withdrawal before 5 years of service is generally taxable, but tax exemption applies if:
- The amount withdrawn is less than Rs 50,000 (though it must be declared in income tax return if applicable).
- Employment is terminated due to ill health or other uncontrollable reasons such as discontinuation of employer’s business—in these cases, withdrawal before 5 years is exempt from tax without TDS.
- EPF balance is transferred from one employer to another during job change; such transfers are not taxable.
If withdrawing before 5 years and the amount exceeds Rs 50,000, TDS at 10% applies if PAN is given; TDS can be avoided by submitting Form 15G/15H if eligible. No TDS applies if total income is below taxable limits and Form 15G/15H is submitted.
Summary of Tax-Exemption Conditions on EPF Withdrawal
|Condition|Tax Exemption Status|TDS Applicability| |-|-|-| |Withdrawal after 5 continuous years of service|Fully exempt|No TDS| |Withdrawal before 5 years but amount < Rs 50,000|Exempt from TDS but must be declared if taxable income|No TDS| |Withdrawal before 5 years due to ill health/business closure|Exempt|No TDS| |Transfer of EPF balance to new employer|Exempt|No TDS| |Withdrawal before 5 years and amount > Rs 50,000|Taxable|TDS @ 10% (PAN given), nil if Form 15G/15H submitted|
In conclusion, completing five continuous years of service or withdrawing under specific exceptions like ill health or business closure are the key to tax exemption. Submitting Form 15G/15H can avoid TDS if income is below taxable limits.
To withdraw your EPF balance online, follow the steps outlined in the "Withdrawing EPF Balance Online" section below. It's essential to ensure you have all the necessary documents and requirements in order before making an application.
During a long-term employment, if an employee completes a minimum of five continuous years, their EPF withdrawal will be fully exempted from income tax and Tax Deducted at Source (TDS) will not apply. In personal-finance situations where an individual needs to withdraw EPF funds before completing five years of service, tax exemption may apply under specific conditions such as ill health, discontinuation of employer’s business, or transferring the balance to a new employer. In these instances, TDS will not be applicable. However, if the withdrawal exceeds Rs 50,000, TDS at 10% will be deducted if a Permanent Account Number (PAN) is provided; TDS can be avoided by submitting Form 15G/15H if eligible.
