Under Section 192A of the Income Tax Act, tax is deducted at source (TDS) on withdrawals from the Employee Provident Fund (EPF). However, not the entire withdrawal amount is subject to tax deduction. Here’s the breakdown:

Threshold Limit:

• No TDS is deducted if the total EPF withdrawal amount Income Tax is less than or equal to Rs. 50,000. This means you can withdraw up to Rs. 50,000 without any tax implications.

Taxable Portion:

• If the total EPF withdrawal amount Income Tax exceeds Rs. 50,000, then TDS is applicable only on the amount exceeding Rs. 50,000. This means the first Rs. 50,000 is exempt from tax.

Tax Rate:

• The TDS rate on the taxable portion of the EPF Income Tax withdrawal is 20% for PAN holders and 30% for non-PAN holders. This rate is applicable for withdrawals made in non-exempt cases.

Exempt Cases:

• There are certain cases where the entire EPF withdrawal is exempt from tax, even if the amount exceeds Rs. 50,000. These cases include:
  • Withdrawal of the entire EPF balance upon retirement (after attaining 55 years of age).
  • Withdrawal of the entire EPF balance due to death of the employee.
  • Withdrawal of 90% of the EPF balance one year before retirement (after attaining 54 years of age).
  • Withdrawal of the entire EPF balance after two months of unemployment.
  • Withdrawal of 75% of the EPF balance after one month of unemployment, with the remaining amount transferred to the PF account of the new job.

Additional Points:

• The employer is responsible for deducting TDS on EPF withdrawals and depositing it with the income tax department.
• You can claim a refund of excess tax deducted by filing an income tax return.
• It’s important to consult with a tax professional to determine the exact amount of tax you are liable to pay on your EPF withdrawal.