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Amendment in Section 192A of the IT Act, 1961

Instructions for deduction of


TDS on withdrawal from PF.
Issue Date: 26-05-2015

ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

PREFACE:

Employee Provident Fund (EPF) scheme was set up to give


substantial benefit to the employee at the time of
retirement. At present the withdrawal of such accumulated
funds on retirement is not taxable.
Even in cases of employees switching jobs, there is a
sizeable section who opt for withdrawal and not transfer.
In this scenario as well, the withdrawal of such
accumulated fund is not taxable.
The above is a well understood transactional compliance
which is prevalent at present. However this benefit will

Ascent has sent an interim alert with a notification

soon vanish

with the Income Tax Departments new

obtained from the EPFO on May 22nd 2015. With this

directive on withdrawals which belong to less than 5 years

subsequent alert we bring you additional details

of membership.

pertaining to this new change and plausible implications.


ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

UPDATE:
Retirement fund body

Employees Provident Fund

Organization will deduct tax at source from next month on


provident fund withdrawals where accumulations are over
Rs. 30,000 and the employee has less than five years of
provident fund membership.
The Finance Act, 2015 (20 of 2015) has inserted a new

section 192A regarding deduction of tax at source on the

change in employment, an individual may withdraw

payment of accumulated provident fund balance due to an

the PF balance under certain circumstances. While

employee. This new provision (section) shall come into

there was no deduction of tax on withdrawal of PF

effect from June 1, 2015,

under any scenario under the earlier tax rules, the

In most cases, the accumulated PF balance is withdrawn at


the time of retirement, and therefore, not taxable in the
hands of the individual. However, in certain cases like

change effective from 1st June 2015 warrants

deduction of tax at source during withdrawal


excluding few scenarios.
ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

METHODOLOGY OF TAXATION FOR PF WITHDRAWAL


WITH LESS THAN 5 YEARS OF MEMBERSHIP:
TDS will be deducted under Sec 192A of the Income
Tax Act, 1961.
If the employees PF withdrawal amount is more than
or equal to Rs.30,000/- with less than 5 years of
Provident Fund membership:
TDS will be deducted @ 10% if Form 15H / 15G is
not submitted, when only furnishing PAN
TDS will be deducted @ maximum marginal rate
that is 34.608% when PAN is not furnished
Employees making PF withdrawal with less than 5
years of service may be paying tax at higher slab rates
(20% or 30%). Therefore, the shortfall in the actual tax
liability vis--vis TDS is required to be paid by these
members either by requesting their new employer to
deduct balance tax or through payment of selfassessment tax.

Key Notes:
1. TDS is deductible at the time of payment
2. Form 15H is for senior citizens (60 years and above) and
Form 15G is for individuals having no taxable income.
Form 15G and 15H are self-declarations and may be
submitted in duplicate
3. Members must quote PAN in Form No 15G / 15H and on
Form 19 (PF withdrawal form)
4. Form No 15G / 15H will not be accepted if the amount of
withdrawal is more than Rs. 2,50,000/- and Rs. 3,
00,000/for individual assesse and senior citizen
respectively
ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

CIRCUMSTANCES UNDER WHICH WITHDRAWAL OF PROVIDENT FUND IS NOT TAXABLE:


If the employee has rendered continuous service with the employer for five years or more. However, if the balance
at credit of the member includes amount(s) transferred from the individuals PF account maintained by previous
employer(s), then the years of continuous service rendered to the former employer(s) would be included for the
purpose of computing the five-year period of service.

If the employee has not rendered continuous service of five years, but the service is terminated by reason of the
employees ill health or discontinuance of the employers business or reasons beyond the control of the employee,
the amount will be tax-exempt.
In case of death of the member and the amount is claimed by the nominee
If the provident fund amount is less than Rs. 30000/- but the member has rendered services less than 5 years
If the member withdraws amount more than or equal to Rs 30000/-, with services less than 5 years but submits
Form 15 G / 15H along with the PAN
When the employee transfers the P F accumulation from previous employer(s) to Current Employer(s)

ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

APPLICABILITY OF FORM 15G AND 15H ON WITHDRAWAL OF PROVIDENT FUND:


There may be cases where the tax payable on the total income of the employees may be nil even after including
the amount of pre-mature withdrawal. For this purpose the government has extended the facility of filing self declaration for non-deduction of tax under Sec 197A of the Act to the employee receiving pre-mature withdrawal.

On Furnishing of such a declaration, no tax will be deducted by the Provident Fund department while making the
payment to such employee. Similar facility of filing self-declaration in Form 15H for non-deduction of tax under Sec
197A of the Act has also been extended to senior citizen employees receiving pre-mature withdrawal.

Form No 15G and 15H cannot be accepted by the department if the amount of withdrawal is more than the basic
exemption limit for the assessment year 2016-17. Basic exemption limit for the assessment year 2016-17 is Rs,
2,50,000/- for Form 15G and Rs. 3,00,000 for Form 15H

ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

RIDERS FOR EMPLOYER AND EMPLOYEE

Employer

Employee

To review the details of Form 11 received by employee


at the time of joining

To transfer accumulation to current employer if the


current employer is a covered establishment under the
PF Act

Advise employees to transfer the provident fund


accumulations from the previous employer

To furnish PAN number in Form 19 to avoid tax


deduction at maximum tax rate

To educate employees on impact of tax if members


withdraw the provident fund accumulations prior to 5
years of membership.

If tax payable on the total income is nil and when the


premature withdrawal pf provident fund is above Rs
30,000/-, to provide 15H / 15G

To include the following documents as part of exit


formalities:

If the pre-mature withdrawal is at a higher slab.


Therefore, the shortfall in the actual tax liability vis--vis
TDS is required to be paid by these members either by
requesting their new employer to deduct balance tax or
through payment of self-assessment tax. For ensuring
the payment of balance tax by these members.

1. Form 19 with insertion to fill PAN


2. Form 15G
3. Form 15H for Senior Citizens

ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

With the stabilization of UAN introduced by the Employees Provident Fund Organization, going forward the
provident fund department would also be able to track the employment status of the member who has applied for
pre-mature (less than 5 years of membership) withdrawal. Hence it would be advisable for the employers to
encourage employees to transfer the provident accumulations from the previous employer to the current employer
instead of opting for withdrawal.
Maximum marginal rate of tax deduction is introduced for non-furnishing of PAN to ensure the collection of balance
tax by employees falling under 20% and 30% slab.
This would mean that the governance process for accounting and payments at the RPFC needs to be updated

suitably. We await further clarity on how this is would be executed and share updates if any in the near future.
ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED

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Disclaimer
The above information is a summary of recent developments and is not intended to be advice on any particular matter. Ascent Consulting Services Pvt Ltd expressly disclaims liability to any person in respect of anything done in
reliance of the contents of these publications. Professional advice should be sought before taking action on any of the information contained in it. Without prior permission of Ascent Consulting Services Pvt Ltd, this Alert may not
be quoted in whole or in part or otherwise referred to in any documents

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ISO 27001 (ISMS) AND ISO 9001 (QMS ) CERTIFIED