The tax deducted on Employees' Provident Fund (EPF) withdrawals has been reduced to 20 percent from 30 percent in non-PAN cases. This announcement was a part of Budget 2023 speech and is intended to help individuals whose Permanent Account Number (PAN) is not updated with the records in the Employees' Provident Fund Organization (EPFO).

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The existing rule

According to the current income tax laws, tax deducted at source (TDS) is deducted on the EPF withdrawal if the money is withdrawn within 5 years of the opening of the EPF account. It is deducted at 10 percent if the withdrawal is done before five years of service. However, if Permanent Account Number (PAN) is not provided, TDS is deducted at highest slab rate of 30 percent if the employment service is less than five years,

In cases, where the entire amount withdrawn is less than Rs 50,000 (in case service is less than five years), then TDS is not applicable.

Further, EPF account holders withdrawing more than Rs 50,000 can avoid paying this TDS by furnishing Form 15G (below 60 years) or Form 15H for senior citizens, provided their annual income is below Rs 2.5 lakh. In order to apply for these forms, subscribers must have a PAN. Some banks even allow these forms to be submitted online through the bank’s website.

The proposed changes

In case, where EPF account is not seeded with account holders' PAN card, TDS rate will come down to 20 percent from April 1, 2023 or from the beginning of FY24.

Withdrawal process

For withdrawing money from EPF, the subscribers can put an online claim. The claim is then forwarded to the employer for approval. Once approved, the amount is credited to the subscriber’s account within 10 days.

In EPF accounts, the employees contribute 12 percent of their salaries, and an equal amount is contributed by the employers. EPFO also allows subscribers to view their balance online through its website. EPFO also provides the balance information via missed call facility and SMS service.