Have you withdrawn money from your PF account? Remember to report it in your IT returns
Filing of income tax returns is an extremely important exercise that must be done carefully and without a fail. In case you have withdrawn money from the employee’s provident fund (EPF) during FY2019-20, you should remember this crucial point. It is important to report the amount irrespective of the fact that the amount is tax-exempt under certain conditions.
Withdrawal of Provident Fund may attract Income Tax. TDS at 10 per cent will be deducted from the withdrawal amount subject to a monetary limit of Rs 50,000, if the withdrawal happened before completing five years of subscription. The government has also allowed the withdrawal of provident fund money for those facing financial stress due to COVID-19. An employee is allowed to withdraw 75 per cent of the outstanding balance in the PF account or three months’ basic plus dearness allowance, whichever is lower, under this relief.
The withdrawal under COVID relief is exempt from tax even if the employee has not completed 5 years of service as per the government guidelines.
Experts, however, advise declaring the amount withdrawn while filing an income tax return because if the tax department maps the income of the taxpayers, there could be discrepancies. Therefore, it is always advisable to declare the withdrawn amount. There is a specific field to declare the exempted income in the tax forms, therefore there is a need to declare it but there is no penalty as the income is exempt from tax.