TDS on Premature withdrawal from Employees Provident Fund [Section 192A]- Under the Employees Provident Fund Act, premature withdrawals from the Recognised Provident Fund (RPF) may attract tax deductions. In this article, we will explore Section 192A and its implications on employees. We will discuss the applicable TDS rate, thresholds, and the consequences of not furnishing PAN.
Under the Employees Provident Fund Act, 1952, certain specified employers are required to comply with the Employees Provident Fund Scheme, 1952. However, these employers are also permitted to establish and manage their own private provident funds subject to approval of these funds by Chief CIT/ CIT. This provident fund scheme is known as Recognised Provident Fund (RPF) under the Act. Under the existing provisions of rule the withdrawal of accumulated balance by an employee from the RPF is exempt in the hands of employee in the following situations –
- If the employee has rendered continuous service with his employer for a period of 5 years or more. For the purpose of calculating 5-year time-limit, service rendered with the previous employer shall be included, if the previous employer also maintained recognized provident fund and the provident fund balance of the employee was transferred by him to the current employer.
- If the employee has been terminated because of certain reasons which are beyond his control (e.g., ill health of the employee, discontinuation of business by employer, completion of project for which the employee was employed, etc.).
- If the employee has resigned before completion of 5 years but he joins another employer (who maintains recognized provident fund and provident fund money with the current employer is transferred to the new employer).
If employee makes withdrawal from RPF other than in the circumstances given above, then such withdrawals are taxable in hands of employee.
Rate of TDS- In view of the above, section 192A has been inserted in Income-tax Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from RPF.
Thresholds limit – to reduce the compliance burden of the employees having low income, a threshold of payment of ₹ 50,000 for applicability of this section has been provided.
Non- furnishing of PAN at the time of pre-mature withdrawals – Non- furnishing of PAN to the RPF for receiving these payments shall attract deduction of tax at the 20%.
Conclusion: Premature withdrawals from the Recognised Provident Fund may attract TDS as per Section 192A of the Income-tax Act. Understanding the tax implications, applicable rates, and thresholds is crucial for employees seeking to withdraw funds. Additionally, ensuring proper PAN furnishing at the time of withdrawal is important to avoid higher tax deductions. Stay informed to make informed decisions about your EPF withdrawals.
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(The author is practicing chartered accountant and can be reached out at ca.atif95@gmail.com, Mobile- 9811270863)
DISCLAIMER:- This Blog is for the purposes of information / knowledge and shall not be treated as solicitation in any manner or of for any other purposes whatsoever.
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