About to withdraw from an EPF account? Keep these 10 points in mind

New Delhi, February 10, 2021: With the change in rules by the Employees Provident Fund Organization (EPFO), partial or full withdrawal from the Employees Provident Fund (EPF) has become more efficient. Subscribers can make a partial withdrawal from their EPF account online. The EPFO   has allowed the employee to withdraw up to 75 per cent of the amount from the EPF fund after one month of resignation/termination. If an employee has been unemployed for more than two months, he can withdraw 100 percent of his EFF account. There are many things to keep in mind before withdrawing from an EPF account.

1. Withdrawal from EPF amount is taxed if the employee has not completed a five-year service period.

2.  If the EPF account has been transferred from the old employer, then the old service balance will also be included in the calculation of total service period for tax.

3. If the period of service in the year of withdrawal is less than five years, the withdrawal amount will be taxed.

4. The EPF account amount is distinguished in four parts: Employee’s contribution, employer’s contribution and interest on both contributions.

5. If the period of continuous employment is less than five years, the employer’s contribution to the EPF and the interest thereon will be taxable as per the ‘Income’ category in the Income Tax Return.

6. If the withdrawal is done before the five-year service period and you have claimed exemption on contribution under Section 80C of the Income Tax Act, the employee’s own contribution will also be taxable under the ‘salary’ category.

7. In view of the withdrawal occuring before five years, the interest received on the customer’s own contribution to the EPF will be taxed under the ‘Income from other sources’ category.

8. Withdrawal before the continuous employment period of five years attracts TDS at 10%.

9. TDS will not be deducted if the amount is less than 50,000 or the company has ceased operations.

10. If the total income of the employee for that financial year is less than the taxable income limit, then TDS deductions can be prevented on EPF withdrawal by filling in Form 15G/15H.