During the presentation of the Union Budget 2023, Finance Minister Nirmala Sitharaman proposed a deduction of 10 per cent in TDS for the taxable component of the Employees' Provident Fund Scheme for non-PAN cases. The TDS will now be at 20 per cent from earlier levels of 30 per cent.
This move by the government is to help the employees whose PANs have not been updated in the Employees Provident Fund Organization's records.
However, the other tax rules remain the same. If an EPF account holder decided to withdraw money before the completion of 5 years of opening the account, then the withdrawal amount would be taxable. Additionally, PF contributions above Rs 2.5 lakh per annum would remain taxable. But if the amount is below Rs 50,000 then TDS will not be charged on withdrawal.
Tax for non-PAN EPF account holders
For those whose accounts are not linked to the PAN card, TDS is deducted based on the total amount in the account, which, from April 1, 2023, will be 20 per cent instead of the earlier 30 per cent. If a non-filer has not submitted returns in the previous year, then the aggregate TDS and TCS of Rs 50,000 then higher tax charges are applicable.
Tax for EPF account holders with linked PAN cards
If the PF account is linked with account holders' PAN card then there will be no TDS charged on the withdrawal of EPF. The amount withdrawn by the account holder will just be added as income and the tax will be charged based on the total income, which means the tax applicable will depend on the tax slabs.
Point to note for new ITR fillers
If this will be your first time to file taxes then, you need to know that you will receive a certificate after TDS is deducted from your EPF. You will need to add this to your Income Tax Return in order to claim any refunds that may be due.
If you want to pay less tax on the EPF withdrawal, then you will have to wait until April 1, 2023, to make any withdrawal from your account if your EPF account is not linked to your PAN.
