Generally, no tax is imposed on the PF accounts as they fall under the EEE bracket: exemptions on investment, interest, and maturity. Although, there are some conditions to get rid of the TDS on the transactions done in any PF account.
Before jumping on how to show PF withdrawal in Income Tax returns, let’s discuss quickly Employee Provident Fund.
Employee Provident Fund or EPF was formed to encourage long-term savings. A small part of the employee’s salary is deposited in this fund. The aim of this fund is that the employee can have some savings after retirement, to sustain a quality life.
There are several reasons why one should have an EPF:
- The money saved in your EPF account is not taxable.
- You can withdraw money from PF anytime if you don’t want to take a loan, for any emergency.
- You will get a big chunk of money post-retirement which will help you to start a new job or just live independently.
EPF is not valid in the states of Jammu and Kashmir. So, if you are from Jammu and Kashmir you must consider other options to get exemptions on tax.
You can withdraw money from your PF account. However, you should know that it’s not always encouraged. There are many terms and conditions that should be kept in mind when withdrawing from a PF account to avoid taxation or TDS. Let’s quickly see them:
Withdrawal limit of PF
As per the Finance Act of 2016, the withdrawal limit of PF was increased from 30,000 to 50,000 Rupees for TDS which was changed under section 192A of the Income Tax Act, 1961. After
TDS is applicable if the withdrawal amount is more than 50,000 rupees and the employee has worked for no more than five years.
Another important point to remember is that your EPF should be recognized by the Commissioner of Income Tax otherwise, any transaction done on EPF will be taxable. So, ask your employer about your EPF status.
Is PF withdrawal taxable under income tax?
Yes, the PF withdrawal is taxable if the withdrawal is more than or equal to 50,000 rupees and the employee has worked less than 5 years. Any transaction done in the EPF has to be reported in the ITR.
Since the taxpayers have to report both the taxable and non-taxable income in the ITR. The income exempted from the tax includes the EPF, and thus any transaction has to be reported in ITR.
Here’s a table to understand the criteria of TDS on PF withdrawal.
| SR.NO. | AMOUNT WITHDRAWN | TAXATION CHARGED | OTHER CONDITIONS |
| 1 | If the amount withdrawn is less than 50,000 and the service is less than 5 years | NO TDS. | If the individual’s annual income is under the taxable slab, the PF withdrawal must be reported in ITR. |
| 2 | If the amount withdrawn is more than or equal to 50,000 and the service is less than 5 years | TDS @ 10 % if only PAN is submitted. No TDS if PAN and form 15G/H is submitted. | |
| 3 | If the withdrawal is done after 5 years of continuous service. | NO TDS is charged. | |
| 4 | If the amount is transferred from one PF account to another due to a job change. | NO TDS is charged. | |
| 5 | If the employment is terminated due to ill health, or the business is shut down, or the reasons for withdrawal are not an employee’s control and the service is less than 5 years. | NO TDS is charged. |
How much PF withdrawal is non-taxable?
The non-taxable withdrawal limit of PF is up to 50,000. This requires the submission of form 15G/15H and your PAN if your service is less than 5 years.
Important Forms for EPF Withdrawal
The most common form used for EPF withdrawal is Form-19. It’s also known as the EPF Withdrawal form. The other forms required while declaring the employee’s income are 15G and 15H.
Is Form 15G mandatory for PF withdrawal?
15G is mandatory for PF withdrawal in case of service less than 5 years to get the rebate. If you submit your pan along with form 15G/15H at the time of PF withdrawal, then TDS is not applicable. If you don’t submit your pan along with form 15G/15H at the time of PF withdrawal, then a TDS of 10 % is applicable. The maximum limit for PF withdrawal is 50,000 rupees.
How can I claim TDS on PF withdrawal?
Who contributes to your EPF? Well, there are three ways in which your EPF receives the money. The three contributors of EPF are the employer, the employee, and the interest in your and the employer’s contribution.
To understand where to report the PF withdrawal in ITR, let’s see which part is taxable and which is not.
- Employee’s contribution to EPF: It’s the amount listed in your salary slip under deductions as a monthly PF contribution. This is not taxable. This part has to be reported under section 10 (11) of ITR under exempted income.
- Interest on Employee’s Contribution: this part is fully taxable, reported under the head of the income from other sources.
- Employer’s Contribution and Interest on it: This portion is also fully taxable and is reported as taxable profits, under section 17(3) of the head salary income.
Let’s see, What’s this section 80 C and how does it affect the TDS?
Section 80C allows taxpayers to reduce their taxable income by doing tax savings investments. As per the new budget 2023, suggested by ICAI, the maximum deduction limit is to be increased from 1.5 lakhs to 2.5 lakhs.
So, is PF also included in 80C?
Yes, if you have claimed a deduction under this section on your contribution at any time you have to pay additional tax on the amount before claiming the deduction. It means that if you have claimed a deduction for this year only and you have been working for five years. Then, you will have to pay additional tax for the last 4 years, if your annual income falls under the taxable slab.
Who is eligible for form 15G for PF withdrawal?
The eligibility criteria for form 15 G are as follows:
- The claimant should be below the age of 60 years and the PAN must be quoted in all the transactions.
- If the claimant’s annual income for the year should be Nil, and the total income interest from all the sources falls under the limited minimum exemption.
- Non-Resident Indians NRIs cannot submit for 15G.
Where can I enter my PF withdrawal in ITR 1? Or How to show PF withdrawal in an income tax return?
All the transactions are to be reported while filing the ITR. You can enter the PF withdrawal transactions online in form ITR 1.
- Register here and fill up the mandatory information.
- Click on the e-filing tab/menu.
- Go to the third tab and click on the exempt incomes.
- From the drop-down menu click on sections 80-C to 80-U and select the relevant section for the withdrawal.
- Fill in the fields applicable and submit.
You can do this on your own or take the help of professionals if you are not sure which forms to select for which transactions.
FAQ- How to Show PF Withdrawal in Income Tax Return.
1. Is TDS cut on PF withdrawal?
Yes, TDS is applicable on PF withdrawal if your service is less than 5 years and the amount is more than or equal to 50,000 rupees.
2. Under which section is PF withdrawal taxable?
If your withdrawal is more than 50,000 rupees, this transaction is taxable under section 192-A of the Income Tax Act,1961.
Conclusion
All transactions are to be reported in ITR. PF withdrawal is taxable if the amount withdrawn is more than or equal to 50,000 rupees and the work experience is less than 5 years. Submission of PAN along with form 15G/H is needed at the time of withdrawal to get the tax exemption on PF. Hope your query about how to show PF withdrawal in Income Tax Return is answered. If not, write us your question in the comments section.
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