The Employees’ Provident Fund (EPF) is one of the most important retirement savings schemes for salaried employees in India.
It helps employees build a financial corpus that can be used after retirement.
However, many employees withdraw their PF before retirement due to job changes, unemployment, or personal needs.
Before doing so, it is important to understand the tax rules, as withdrawing your EPF balance too early could result in Tax Deducted at Source (TDS) and additional tax liability.
No Tax if You Complete 5 Years of Service
The Income Tax Act provides a major benefit to employees who complete at least five years of continuous service.
Under Section 10(12), if you withdraw your EPF after completing five years, the entire amount is tax-free.
This includes your own contribution, your employer’s contribution, and the interest earned on the account.
What if You Change Jobs?
Changing jobs does not automatically reset the five-year period.
If you transfer your PF balance from your old employer to your new employer’s EPF account, your previous years of service are also counted.
Once your total continuous service reaches five years, you can withdraw your EPF without paying tax, provided all other conditions are met.
Can You Withdraw PF During Unemployment?
Yes. EPFO allows members to withdraw their entire PF balance if they remain unemployed for at least two months.
However, even in this case, the five-year continuous service rule decides whether the withdrawal will be tax-free or taxable.
When Will TDS Be Deducted?
If you withdraw ₹30,000 or more before completing five years of continuous service, TDS may be deducted.
10% TDS will be deducted if you have submitted your PAN but have not submitted Form 15G or Form 15H.
If you do not provide your PAN, TDS will be deducted at the maximum marginal tax rate of 34.608%.
When is No TDS Deducted?
TDS will not be deducted in the following situations:
You withdraw your PF after completing five years of continuous service.
Your PF withdrawal is less than ₹30,000, even if you have not completed five years.
You withdraw ₹30,000 or more before five years but submit Form 15G or Form 15H along with your PAN, subject to eligibility.
You transfer your PF balance from one EPF account to another.
Your employment ends due to ill health.
The employer closes the business.
The employment ends because a project is completed.
The job ends due to reasons beyond the employee’s control.
Important Things Every EPF Member Should Know
TDS is deducted at the time the PF amount is paid and is governed by Section 192A of the Income Tax Act, 1961.
Form 15H is meant for senior citizens, while Form 15G is for individuals whose taxable income is below the prescribed limit.
These forms are self-declarations that help eligible members avoid TDS on PF withdrawals.
Employees should also ensure that their PAN is correctly mentioned in Form 19 as well as in Form 15G or Form 15H, wherever applicable, to avoid higher TDS deductions.
