Withdrawing your EPF corpus can be taxable if you withdraw it before 5 years of continuous service. However, we have a hack!
-Section 192A of the Income Tax Act deals with deducting tax at source on accumulated PF premature withdrawal. TDS will be deducted at 10%. So, if you withdraw ₹1,00,000 from PF account TDS will be ₹10,000.
-Exemptions u/s 192A
· Total EPF withdrawal is less than ₹50,000.
· EPF withdrawal is made after continuous service of at least 5 years.
· EPF amount has been transferred from one account to another.
-5 years of service is not necessarily required under one employer. It can also be under 2 employers. So, if you were an employee for X Ltd. for 3 years and are a current employee at T Ltd. for 2 years, Tenure: 3 + 2 = 5 years.
-Hack to save tax on withdrawal EPF? Withdrawal is taxed under the head salary so if you divide your EPF withdrawal for up to ₹50,000 p.a., then your withdrawal will become tax free. Here's how-
Say you have ₹1.4 lakhs in EPF. Now, you do business & have no income under salary head. So, you can withdraw the EPF corpus as follows:
· By 31/03/25: ₹50,000
· By 31/03/26: ₹50,000
· By 31/03/27: ₹40,000
This way, you can claim 100% standard deduction and pay no tax.
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