New PF withdrawal rule: PAN card holders must do this when filing income tax returns
Provident Fund Withdrawal Guidelines: PF account holders who withdraw their EPF before 5 years of account opening are subject to income tax on the withdrawal amount.
The Union Budget presented by Finance Minister Nirmala Sitharaman suggests lowering the TDS (tax deducted at source) rate for EPF withdrawals made from accounts that have not been seeded with a PAN. If the user's PAN card is not seeded with the EPF account, the user will be subject to a 20% tax rate instead of the present 30% rate on withdrawals made from the account before the completion of five years, as outlined in Budget 2023.
“At present the TDS rate on withdrawal of taxable component from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases,” FM Sitharaman had said during Budget presentation.
Premature withdrawals from an EPF account are now subject to taxation. The funds would not be subject to TDS if the withdrawal was under Rs 50,000. If you haven't linked your PAN to your EPF account, you'll have to pay tax at the maximum rate of 30 percent on withdrawals above Rs 50,000.
If an individual withdraws funds from their EPF account during the first five years after starting the account, the withdrawal amount will be considered part of their taxable income.
Also, READ: Updating your address on Aadhaar card: A step-by-step guide for easy and quick update
If you haven't already done so, you should wait until April 1 to withdraw money from your EPF account, since after that date the tax rate would be 20% instead of 30% if your PAN is connected to your EPF account.
Sitharaman suggested in the budget that non-government paid workers' leave encashment upon retirement be free from taxation at Rs 25 lakh, up from Rs 3 lakh.