The Employees’ Provident Fund (EPF) is one of the most important retirement savings schemes for salaried employees.
It helps employees build a financial corpus that can be used after retirement or during emergencies.
However, if you withdraw your PF balance before completing five years of continuous service, you may have to pay tax, and TDS (Tax Deducted at Source) may also apply. Here’s everything you need to know.
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No Tax After Completing 5 Years of Service
The good news is that if you have completed at least five years of continuous service, your EPF withdrawal is completely tax-free under Section 10(12) of the Income Tax Act.
In such cases, you can withdraw your entire PF balance, including:
Your own contribution
Your employer’s contribution
Interest earned on the account
No tax or TDS will be applicable if this condition is met.
What If You Change Jobs?
Many employees worry that changing jobs will affect the five-year rule.
However, if you transfer your PF account from your old employer to your new employer, your previous years of service are also counted.
This means your total continuous service remains intact, helping you qualify for tax-free withdrawal after completing five years.
Can You Withdraw PF During Unemployment?
Yes. EPFO allows members to withdraw their full PF balance after remaining unemployed for two months.
However, even in this case, the five-year continuous service rule determines whether the withdrawal will be taxable or tax-free.
When Will TDS Be Deducted?
If you withdraw ₹30,000 or more before completing five years of continuous service, TDS may be deducted.
If you have submitted your PAN but have not submitted Form 15G or Form 15H, TDS will be deducted at 10%.
If you do not provide your PAN, TDS will be deducted at the maximum marginal rate of 34.608%.
Cases Where No TDS Will Be Deducted
TDS will not be deducted in the following situations:
You withdraw PF after completing five years of continuous service.
Your withdrawal amount is less than ₹30,000, even if you have not completed five years.
You withdraw ₹30,000 or more before five years but submit Form 15G/15H along with your PAN.
You transfer your PF balance from one EPF account to another.
Your employment ends due to ill health.
Your employer shuts down the business.
Your employment ends after the completion of a project.
You leave your job due to reasons beyond your control.
Important Things Every EPF Member Should Know
TDS is deducted at the time of PF payment under Section 192A of the Income Tax Act, 1961.
Form 15G is meant for individuals whose income is below the taxable limit, while Form 15H is meant for senior citizens who meet the prescribed conditions.
To avoid unnecessary TDS, members should ensure that their PAN is correctly linked and mentioned in Form 19 as well as Form 15G or Form 15H, wherever applicable.
Understanding these rules can help you avoid unnecessary tax deductions and make better decisions before withdrawing your EPF savings.