New Delhi: Union Ministry of Labour and Employment had last year issued notification amending EPF Scheme 1952 to allow withdrawal of non-refundable advance by EPF members/subscribers in the wake of COVID -19 pandemic in the country.
The notification permited PF withdrawal of upto the amount of basic wages and dearness allowance for three months or upto 75% of the amount standing to member’s credit in the EPF account, whichever is less, in the event of outbreak of epidemic or pandemic. Since the particular withdrawal was allowed due to the onslaught of covid-19 pandemic, the government had made such withdrawals tax-free in the hands of employees.
For employees, who wish to make PF withdrawals other than the permitted COVID-19 stress related withdrawal, the following taxation implication must be understood.
What are the different types of Advances and service eligibilities against each?
The service eligiblilty against different types of advances for which member can apply are as under:
1. Housing Loan / Purchase of Site / House / Flat or for construction / addition
2. Lockout or closure of factory
3. Illness of member / family
4. Marriage of self/son/daughter /brother/sister
5. Post matriculation education of children
6. Natural Calamity
7. Cut in electricity in establishment
8. Purchasing equipment by physically handicapped
9. One year before retirement
10. Investment in Varistha Pension Bima Yojana
Such withdrawals are generally permitted after completing five years of service and are therefore tax-free. Additionally, if an employee is out of job for 2 months, the EPF balance can be fully withdrawn.
However, PF fund withdrawn for purpose other than above reasons before employees complete five years of continuous service (in one or more companies) will attract tax. If employees withdraw more than Rs 50,000 from the PF fund then TDS @10 percent under Section 192A will also be levied. If the person does not have a PAN, in cases of such withdrawals, TDS will be deducted @30 percent. TDS will not be levied if the withdrawal is less than Rs 30,000.