Employees Provident Fund (EPF) is a necessary financial support to the workers in the organized sector as it ensures a secure post retirements life through assured retirement benefits and pension. Still, employees in some cases require money from their EPF accounts before they retire.
The Employees Provident Fund Organization (Employee Provident Fund Organization) recently revised the withdrawal rules and it also affects the tax liability. We will be breaking down these changes and what it means to EPF account holders.
New EPF Withdrawal Rules 2024
Generally, employees cannot withdraw their EPF funds before reaching retirement age, unless there are certain conditions. Medical emergencies, higher education or purchasing or constructing a house are allowed for partial withdrawals. An employee who is fired gets to take out 75 percent of his EPF balance after a month of unemployment and the entire balance after two months, if he declares his unemployment.
When Will I Be Sentenced with 30% On Withdrawal?
Under the EPFO scheme, EPF funds will be tax free if the subscriber has been contributing to it for minimum five years. The TDS (Tax Deducted at Source) on EPF withdrawal is 10%, if the amount withdrawn is beyond Rs 50,000 over 5 years after opening up of the EPF account. However, the rate goes up as high as 30% without a PAN card. The tax is not applicable if the amount of withdrawal is much less than Rs 50,000.
Key Changes in EPF Withdrawal Rules
After changes to the EPF withdrawal rules subscribers are now required to contribute in the retirement fund for five years before they can withdraw the money without paying taxes.
It was done to discourage premature withdrawals, and to ensure that the vast majority of the funds are actually used for retirement. However, to allow for financial needs of the employee, withdrawals are allowed by EPFO only if and when the Employee can satisfy the specific criteria established by it.
