PF withdrawal: This step will help you avoid TDS deduction
PF withdrawal: Provident Fund or PF account is considered a retirement-oriented investment option but the Employees’ Provident fund Organisation (EPFO) allows PF withdrawal before retirement too. However, if an EPFO member is withdrawing EPF or PF balance before 5 years of account opening, in that case TDS (Tax Deduction at Source) becomes applicable. As per the PF withdrawal rules, if the EPF/PF account is attached with PAN, in that case rate ofTDS deduction will be 10 per cent while in the case of EPF account not seeded with PAN, the TDS rate will get doubled means 20 per cent. However, there are some certain cases in which a PF account holder withdrawing balance before five years of account opening can avoid TDS deduction on one’s PF or EPF balance withdrawal.
Speaking on how a EPFO subscriber can avoid TDS deduction even though the PF withdrawal is done before five years of account opening Pankaj Mathpal, Founder & CEO at Optima Money Managers said, “If the PF withdrawal amount is less than ₹50,000, then there will be no TDS levied on one’s PF withdrawal. However, in case the PF amount withdrawn is above ₹50,000 then the TDS becomes applicable if one’s annual income is more than ₹2.5 lakh.”
Highlighting the case in which one can avoid TDS deduction even when the PF withdrawal amount is more than ₹50,000; Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, “If the PF account holder’s annual income is below ₹2.5 lakh, then in that case one can avoid TDS deduction by furnishing Form 15G or 15H.” He said that by submitting Form 15G or Form 15H, the PF account holder become eligible for TDS exemption even though its withdrawal amount is more than ₹50,000.
Asked about the difference in Form 15G and Form 15H Pankaj Mathpal of Optima Money Managers said that Form 15G is for those who are below 60 years of age while Form 15H is for the senior citizens.