New PF withdrawal rule: Check this in FY24 while filing Income Tax Return
According to the Income Tax rule, if money is withdrawn from the EPF account before the completion of five years of the account opening, the whole withdrawal amount would remain taxable.
Union finance minister Nirmala Sitharaman proposed to reduce Tax Deduction at Source (TDS) from 30% to 20% for the taxable part of the Employees' Provident Fund (EPF) Scheme for non-PAN cases in Budget 2023-24.
According to the Income Tax rule, if money is withdrawn from the EPF account before the completion of five years of the account opening, the whole withdrawal amount would remain taxable and PF contribution above ₹2.5 lakh per annum would also remain taxable.
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Sitharaman in her budget speech said, "At present the TDS rate on withdrawal of taxable component from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases."
In simple words, PF withdrawal would incur taxes if the withdrawal is done before five years of account opening, while if the Individual's PF account is linked with his/her PAN card, then no tax would be levied on the amount, explained a Mint report citing Balawant Jain, a Mumbai-based tax expert.
While filing the Income Tax Return (ITR) for that year, the withdrawal amount would be added to the total taxable income for that particular year and according to the applicable income tax slab, the tax would be levied on the individual, he further explained.
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However, if the PF account is not seeded with the PAN card, the applicable TDS would be deducted from the net amount available in the PF account.