When does your EPF become taxable?

For salaried individuals, the monthly contribution towards the Employee’s Provident Fund (EPF) remains the only forced savings mechanism. Not only is the contribution eligible for tax benefits under Section 80C, both the interest earned and money received on super annuation are tax-free. Here is a look at certain scenarios with regards to your PF and whether you will be taxed.

Scenario 1: Withdrawal of EPF after 5 years of continuous service
Taxability: No TDS. Further, the individual need not offer the same in the return of income as such withdrawal is exempt from tax

Scenario 2: Transfer of PF from one account to another upon a change of job
Taxability: No TDS. Further, the individual need not offer the same in return of income as it is not taxable

Scenario 3: Before completion of 5 continuous years of service or if employment is terminated due to employee’s ill health, the business of the employer is discontinued or the reasons for withdrawal are beyond the employee’s control
Taxability: No TDS. Further, the individual need not offer the same in the return of income as such withdrawal is exempt from tax

Scenario 4: Amount withdrawn is less than Rs 50,000 before completion of 5 continuous years of service
Taxability: No TDS. However, If the individual falls in the taxable bracket, he has to offer such EPF withdrawal in his tax return

Scenario 5: Amount withdrawn is more than Rs 50,000 before completion of 5 years of continuous service
Taxability: TDS @ 10% if PAN is furnished; If PAN is not furnished, TDS at maximum marginal tax rate. No TDS if Form 15G/15H is furnished

Source: Cleartax