Section 192A of the Income Tax Act, 1961 deals with the TDS on premature withdrawal of accumulated balance from the Employees’ Provident Fund (EPF). This section ensures that the government receives a portion of the tax on premature EPF withdrawals, which are considered taxable income in such cases. It also encourages employees to retain their EPF contributions for long-term savings.
1. Applicability & Threshold:
- TDS is applicable when an employee withdraws their EPF balance before completing 5 years of continuous service.
- No TDS is deducted if the withdrawal amount is ₹50,000 or less.
2. Rate of TDS:
- 10% TDS is deducted if the employee provides their PAN.
- 20% or the maximum marginal rate is applied if the PAN is not provided.
3. Components on which TDS shall be deducted:
| Component of lump sum payment | Is this component taxable in the hands of employee not completing continuous 5 years of service? | Is it subject to TDS if other conditions of section 192A are satisfied? |
| Employer’s Contribution | Taxable under head “Salary” | Subject to TDS |
| Interest on Employer’s Contribution | Taxable under head “Salary” | Subject to TDS |
| Employee’s Contribution | Not Taxable | No TDS required |
| Interest on Employee’s Contribution | Taxable under head “Other Sources” | Subject to TDS |
4. Exceptions:
- If the total EPF balance withdrawal is less than ₹50,000.
- When the employee submits Form 15G/15H, declaring that their total income is below the taxable limit (applicable for individuals below 60 years for Form 15G and senior citizens for Form 15H).
- When the withdrawal is due to reasons such as retirement, health issues, or permanent disability, as per specific conditions.
- In case of a job change, the PF amount is transferred from one PF account to another.