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EPF Withdrawal: Transfer Funds from Your PF Account to Save Income Tax 2021

Employees’ Provident Fund (EPF) or PF as it is commonly known, is the retirement-saviour for salaried individuals. Contribution to EPF is deductible under Section 80C to claim tax benefits. However, EPF withdrawal is also subject to tax implications. Here is all you want to know about PF details in the context of income tax rules on withdrawal.

Exemption of TDS on EPF Withdrawal

The circumstances under which you don’t have to pay TD on withdrawal of EFP are:

        You have transferred the PF balance from one employer to another at the time of switching jobs.


        You have withdrawn the entire EPF balance after the completion of 5 years of continued service.


        You have withdrawn less than Rs. 50,000 before completion of 5 years of continuous service. However, if you fall under the taxable bracket, a TDS waiver will not be applicable.


        You have furnished Form 15G/15H along with PF fund on withdrawal of more than Rs50,000 before completion of 5 years of continued service.


        You have not completed 5 years of continued service but withdrawn EPF for either of three reasons. A) Your employer has suspended the business. B) Your employment is terminated due to your ill-health. C) Any other factor out of your control.

Please note that 5 years of continued service spans across your previous and current employer. There should be no employment gap in between.

Deduction of Tax on EPF Withdrawal

You are liable to pay tax on EPF withdrawal under the following circumstances:

        10% TDS on submission of PAN at the time of withdrawing less than Rs50,000 before completion of 5 years of continued service. If you fail to give PAN, a high TDS of 30% will be applicable on the return of income.


        You have withdrawn the entire EPF balance after completion of 5 years of continued service for personal purposes such as child’s education or marriage, buy a new house, etc.


        Interest earned on your contribution to EPF is taxable under ‘income from other sources’.


        Employer’s contribution and interest are fully taxable in your salary component.


        While your contribution to EPF is not taxable, you will need to pay extra tax at the time of withdrawal in case you have claimed deduction under Section 80C previously.

As you can understand, EPF withdrawal has its income tax computation complexities. Hence, it is advisable to transfer your PF to the new company every time you change employment and remain in continuous service for at least 5 years. However, if you happen to withdraw money, do not let it sit in your savings account earning meagre interest. You should rather look for better investment options.

Here is a quick investment guide to help you:

        Plan how you want to utilize the EPF withdrawal amount – whether you would need it to meet a short-term or long-term expenditure.

        The choice of investment instrument depends on your financial milestones and risk-taking capability, but an FD is always a good option. 

        Invest EPF withdrawal in a safe instrument like Bajaj Finance FD which can give you attractive and assured returns up to 7.25%. You can invest for a maximum of 5 years and then renew it again as per your needs. Investing PF in a high-yielding company FD such as Bajaj Finance FD can help you beat inflation.

In a nutshell, you must check for tax rules before you decide to withdraw the EPF. It can save you significant taxes in 2021 and beyond!

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