Employee Provident Fund withdrawal taxable or tax-free?

Income tax rules on EPF withdrawal

1) If the employee has rendered continuous service for a period of five years or more, EPF withdrawal does not attract any tax liability.

It is to be noted that for calculating the five-year time limit, services rendered with the previous employer is also included. 

2) Even if the employee has not rendered such continuous service for five years, in certain cases EPF withdrawal is not taxable:

The services has been terminated due to employees’ ill health, contraction or discontinuance of the employer’s business or any other cause beyond the control of the employee.

3) After 36 months of the last active contribution in a EPF account, it gets categorised as dormant or inoperative account. The PF account continues to earn interest till the account holder reaches the retirement age. 

4) Income tax exemption is also allowed for one-time portability from a recognized provident fund to NPS. This had come into effect from assessment year 2017-18.

5) On withdrawal before five years of continuous service, TDS or tax deducted at source at 10% is levied.

If the amount is more than 50,000, and period of service is less than five years, Form 15G/15H can be submitted to avoid TDS for subscribers having no taxable income.

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