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An individual has to pay tax on withdrawal of PF accumulations if the same has been withdrawn from a recognized PF account without rendering continuous services for five years or more with the employer. This article covers focuses on withdrawing  EPF before 5 years,  How to withdraw EPF before 5 years,Is EPF balance taxable, Why is my employer is asking to fill Form 15, what is Form 15G, Can I claim TDS? How to claim TDS, How to show PF withdrawal while filing income tax return.

EPF Withdrawal before 5 Years

It is important to note that withdrawal of the EPF account by a salaried employee is illegal. Many employees withdraw their EPF account at the time of leaving the organisation. Legally right thing is to transfer the EPF account from old employer to new employer. Overview of EPF Withdrawl before 5 years is given below.

  • After leaving your old job and being unemployed for 2 months you can withdraw EPF  & EPS. Exceptions.
    • A woman who quit their job for getting married, pregnancy or childbirth will not have to wait for two months to withdraw.
    • if you are quitting due to health reasons.
    • Who is going abroad for employment/settlement and don’t intend to return soon.
  • Provident fund withdrawal before five years of completion of service will attract TDS(tax deducted at source) effective from 1 Jun 2015.
    • TDS on EPF will be deducted if withdrawal is more than Rs 50,000. This is applicable from June 2016.Earlier this limit was Rs 30,000.
    • TDS will be deducted at 10 % provided PAN is submitted. Otherwise, TDS is dedthe ratethe  rate of 34.608 % if PAN is not submitted.
    • If you withdraw offline you can submit form 15G/15H to avoid TDS.
  • You can withdraw online or offline
    • You can withdraw online using UAN member portal (if KYC is approved). Our article How to do Full or Partial EPF Withdrawal Online explains it in detail with images and video.
    • To withdraw EPF offline through old employer If you have UAN then you have to submit Composite PF Claim Forms (Aadhar based and Non-Aadhar based) which replaced forms No. 19, 10C, 31, 19 (UAN), 10C (UAN) and 31 (UAN)
    • To withdraw EPF offline through old employer If you don’t have UAN You have to submit Form 19, and Form 10C
    • To withdraw EPF offline without going through old employer for un exempted organisations you can approach EPFO directly. Unexempted  organisations are those where you are not contributing to EPF Private Trust.
  • You can Track EPF Withdrawal
  • You will get regular SMS updates
  • You’ll receive two different amounts. One is for your EPF withdrawal and one is for Pension contribution. 
  • if you withdraw your PF balance before the expiry of five years of contribution, then it is taxable in the year in which you withdrew.
    • Your employer’s contributions along with the accumulated interest amount will be taxed as “profits in lieu of salary” under the head Salary.However, relief under Section 89 will be available.
    • Interest accumulated on your (employee) contributions will be taxed under the head “Income from other sources”.
    • The tax deductions claimed on your contributions to EPF  will be revoked or rolled back, and shall be liable to tax.

When can one do EPF Withdrawal?

When can one withdraw from EPF?

The rules are that an employee should not be in employment for two months after resigning if he has to withdraw his Provident Fund amount. Earlier one could withdraw EPF from one job even after joining another job as EPFO could not track if one is working or had a PF account. But now with UAN number, EPFO can find out whether you are employed or not and hence EPFO can theoretically reject your application. Remember that EPF is a long term retirement investment product, and transfer of account will help you get the magic of compounding.Our article UAN or Universal Account Number and Registration of UAN  explains the UAN number in detail.

Are two months waiting period for EPF  withdrawal applicable in all cases?

No. In following cases, 2 month waiting period for applying for EPF withdrawal is waived off.

  • Those employees who are going abroad for employment/settlement and they don’t intend to return soon, can Apply for immediate PF withdrawal.
  • A woman can Withdraw money if she is leaving service for marriage. You have to provide proof of the marriage such as wedding card.
  • These are after the retirement or death of the employee.

How are the 5 years calculated for EPF Withdrawal?

5 years mean 5 years of contribution to EPF. Say you worked in an organization for 3 years and then left it for higher studies. Then you have contributed to EPF for 3 years old. Just holding the PF account with the employer for five years will not make it 5 years and hence shall not take away the tax implications. But your EPF would earn interest. So If you intend to take job after some time(say after higher st a dies) you can leave your PF account and after joining transfer it to new employer.

What happens if I don’t withdraw from the EPF account after leaving the job?

When you leave the job, you stop contributing to EPF account and your EPF account becomes inactive. EPF accounts were deemed inoperative when there was no contribution for 36 months. Such accounts stopped earning interest from the financial year 2011-12.  On 2 August 2016, labour minister Bandaru Dattatreya said in the Rajya Sabha that the government has decided to credit interest to these inoperative accounts, which will turn them into operative accounts. On 11 Nov 2016,  notification was issued to this effect.

Now, the account will be considered inoperative only when the employees retire at the age of 55 years or move abroad permanently. According to the notification, if the account holder dies, then too, his/her account will be considered inoperative.

How much will I get on withdrawing from EPF?

You can check your EPF balance in various ways. If UAN registered then you can check EPF Balance by following methods  Our article How to get information about EPF balance : Annual Statement, SMS, E-Passbook discusses it in detail

  • UAN Passbook. 
    • Now Member passbook is available at >> Our Services >> For Employees >> Member Passbook. You can use your UAN number and password to download the passbook.
  • Check EPF Balance by sending SMS 
    • If your UAN is registered then from the mobile send SMS EPFOHO UAN ENG to 7738 299 899.  You have option to specify 9 other languages like HINDI,Gujrati etc,
  • Check EPF balance with EPF mobile App 
    • Download  Mobile App m-epf from Google Play store. One can also view their monthly credits through the passbook as well view their details available with EPFO
  • Get EPF Balance by Missed Call 
    • If you have a valid UAN, your mobile number too will be registered with the EPF department. A missed call to 011 229 01 406, at no cost, will ensure that you receive an SMS that lists down your PF number, age and name as per the EPF record. 

For UAN not registered You can check EPF balance as follows.

  • EPF through Member Balance website and get SMSFrom July  2011 one can check the EPF Account balance online. Note Often balance is old and not updated
    • Go to http://www.epfindia.com/site_en/KYEPFB.php
    • Select EPFO Office
    • Enter PF Account Number which is in the format : EPFO Office Code/Establishment Code(Max. 7 Digits)/Extension(Max. 3 digits)/Account Number (Max 7 digit) (PF Account Number may not have Extension code, in that case leave it blank).
    • Enter your Mobile and Name, Accept Terms and condition and Submit.
    • You will get SMS alert from EPFO : EE amount : Rs XXXXX and ER amount Rs:XXXXX as on <Today’s Date>(Account updated upto Date).

You would get employer’s contribution, employee contribution and interest earned on it. To refresh Normally, both the employer and employee contribute 12% each of the basic salary of the employee plus DA (if any) to EPF.   (Employee can contribute more towards EPF voluntarily which is called VPF)

    • The entire 12% of employees contribution is added towards PF.
    • 8.33% out of the total 12% of the employers contribution is diverted to the EPS or pension scheme and the balance 3.67% is invested in PF. However, if the basic pay of an employee exceeds Rs. 6,500 per month, the contribution towards pension scheme is restricted to 8.33% of Rs. 6,500  (i.e. Rs. 541 per month) or 8.33% of 15,000 ie 1250 pm after Oct 2014. The balance of employers contribution goes into EPF. EPFO has now raised the eligibility ceiling for EPS to Rs 15,000 a month.
    • The employer contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act.

How can one withdraw from EPF online?

On 1 May 2017, EPFO announced that all EPF Member’s who have activated their UAN and seeded their KYC (Aadhaar) with EPFO will be able to apply for PF Final Settlement (Form19), Pension Withdrawal Benefit (Form10-C) and PF Part Withdrawal (Form31) from the UAN Interface directly. If you meet these requirements then you can withdraw online.

Our article How to do Full or Partial EPF Withdrawal Online explains it in detail with images and video.

Note: If you withdraw online then there is no way to fill Form 15G/15H. They 

  • Log on to the UAN portal and enter your details.
  • Check whether the KYC details seeded are correct and verified or not.  Click on Manage->KYC in Approved KYC section you should see your PAN, Aadhaar, and Bank Details as shown in the image below. All your KYC should be approved by your employer.
EPF Withdrawal Approved KYC

EPF Withdrawal Approved KYC

  • Select Online Services.
  • Select the claim(Form 31, 19 & 10C).
    • If you are withdrawing EPF then submit both the Forms, Form 19 and 10C.(You would have to repeat the process twice)
    • verify the online PF claim using One Time Password (OTP) that you will receive on your mobile number linked with your UAN.
    • EPFO will obtain your KYC i.e. Aadhaar details from UIDAI and your online PF claim will be processed and your bank account will be credited with the amount of the claim.
    • Track your claim status from UAN Member portal itself.
EPF Online Withdrawal

EPF Online Withdrawal

How can one withdraw from EPF offline?

You need the following information for withdrawing.

    • PF account number
    • Date of joining
    • Date of leaving
    • Bank Account number , IFSC code where the money will be deposited.
    • A copy of blank cheque for account number verification.
    • Form 15G/15H so that TDS before 5 years is deducted at the rate of 10 percent. This is done if you have less than 5 years of service.

On 20 Feb 2017 EPFO(Employees’ Provident Fund Organisation) has introduced Composite PF Claim Forms (Aadhar based and Non-Aadhar based) which replaces existing Forms No. 19, 10C, 31, 19 (UAN), 10C (UAN) and 31 (UAN). This is to simply the form for claiming the partial and full withdrawal from the EPF. Now you can submit the form to your previous employer or to your EPFO.

EPF New Composite Claim Form for Full/Partial Withdrawal using Aadhar and UAN

EPF New Composite Claim Form for Full/Partial Withdrawal using Aadhar and UAN

How to withdraw If you don’t have UAN

You have to submit Form 19,  instructions to fill form 19 from the EPFO website.

  1. Employer will attest the form and send it to the regional PF office.
  2. The regional PF office takes about one month to process your application.
  3. EPFO deposits PF amount directly to the employee’s bank account.

You can track your application status through http://www.epfindia.com/site_en/KYCS.php .Know you can also give SMS number in the application form and receive updates.

What is Form 15G or 15H? Why do I have to fill it?

Form No. 15G or 15H are self-declaration forms that can be furnished by individuals to state that their income is below the taxable limit and hence no TDS should be deducted.

  • Provident fund withdrawal is before five years of completion of service attracts tax deducted at source (TDS) at 10 per cent from Jun 1 2015.
  • TDS will be deducted at 34 per cent if one does not submit PAN.
  • Exemption from TDS has been given to subscribers with no taxable income, provided they submit 15G/15H form. To avoid the levy of TDS, 15H (for senior citizens) or Form No. 15G (other than senior citizens) can be submitted, provided the provident fund amount payable is up to  basic exemption limit which for AY 2016-17 is 2,50,000 and Rs 3,00,000 for senior citizens respectively.
  • Our article  How to Fill Form 15G? How to Fill Form 15H? explains how to fill the form 15G/15H in detail.

Sample Filled Form 15H for EPF Withdrawal

Sample filled form 15HG for Aarti Shukla, who is withdrawing on 7 Jun 2017, her EPF of Rs 1,30,00 and has 10,000 other income. If you withdraw between 1 Apr 2017 to 31 Mar 2018

  •  then Previous Year or PY( Pt 4 in the Form) is 2017-18 and Assessment AY would be 2018-19.
  • For 15(a) Mention latest Assessment Year for which Income Tax Return has been submitted and processed.
    • If you have filed return for FY 2016-17 or AY 2017-18 last date for which is 31 Jul 2017 mention AY 2017-18.
    • Else mention the last Assessment Year in which your ITR was submitted. For example if You filed return for FY 2015-16 or AY 2016-17 then mention AY 2016-17.
  • In the declaration part Assessment Year would be 2018-19
Form 15G for EPF Withdrawal

Form 15G for EPF Withdrawal

Can my employer say no to withdrawing my EPF application?

An employer cannot deny signing your EPF withdrawal form, and he should not, because PF is your money and no one has any right on it. If he does not cooperate  you can submit the application to Regional EPFO office. You have to attest your application form by any of these authorities: Manager of a bank or  any gazetted officer or  Member of the Central Board of Trustees./ committee/ Regional Committee (Employees’ Provident Fund Organization) or Magistrate/ Post/ Sub Post Master/ President of Village Panchayat/ Notary Public.  Note that you have to take signature and stamp in every page of the application. Attach service proof such as copies of payslip, ID card, Form 16 or appointment letter from employer to substantiate. Also attach copy of your identity proof as well as Address proof.

Since this is bypass route, EPFO does not encourage this process. Also, there is more chance of fraud as well. Hence It asks for a letter which should state the reason of direct application for EPF withdrawal.

How do I know the status of my withdrawal application?

You can go and check your EPF Claim Status by going to EPF Webpage for EPF Claim Status .Select the EPFO Office where your account was maintained and furnish your PF Account number. You would get the status as shown in the image below. Document Know Your Claim Status (pdf format) lists the steps in detail with images at each step. Please be aware of the tax implications of withdrawal. 

EPF Withdrawal Check Claim Status

EPF Withdrawal Check Claim Status

How long will it take for  EPF Withdrawal?

EPFO handles EPF withdrawal within 20 days. It is planning to bring it down to few hours.

Alternatives to EPF Withdrawal : Transfer of EPF

How to transfer EPF? 

Ideally, you should initiate the process of transferring your EPF balance as soon as you join your new organization and are allotted a new PF account number.  Currently all the online EPF Transfer claims are through http://epfindia.com/Employee_OTCP.html . Our article Transfer EPF account online : OTCP explains it in detail.

If you need money you can partially withdraw from your EPF account, while in service.

You can withdraw from your EPF account upon emergency  subject to few conditions and situations mostly after serving at least 5 years of contribution. Earlier it was one of the popular method shown in Hindi movies like Ferrai Ki Sawwari.

    • Education or marriage: Withdrawal is allowed for the purpose of self, a sibling’s or children’s marriage or for self/children’s education. You need to complete at least 7 years of service to be eligible for this. Relevant proofs are required. You need to submit Form 31 to your employer. Withdrawal amount is up to 50 per cent of the corpus accumulated till date.
    • Medical treatment: Withdrawal is allowed for medical treatment of self, spouse, children or parents. For this, no restrictions are imposed on years of service. You can withdraw up to six times your monthly salary or the total corpus accumulated till date, whichever is lesser. Relevant proofs are to be submitted along with Form 31. There is no limit on the number of withdrawals.
    • Purchase of plot: The plot needs to be registered in your name , your spouse’s name or jointly. You can withdraw up to 24 times the monthly salary. However, withdrawal here is allowed only once.
    • Construction/purchase of flat or house: You need to have completed at least 5 years of service. Withdrawal is allowed up to 36 times your monthly salary.
    • Repayment of home loan: You need to have at least 10 years of employment.
    • Renovation of house: You need to have completed at least 5 years of service. You can withdraw up to 12 times your monthly salary.
    • Pre-retirement: Minimum age is 54 years. You can withdraw only once and up to 90 per cent of the corpus accumulated.

Tax and EPF Withdrawal

Is there TDS on EPF withdrawal?

TDS is not applicable:

  • If the withdrawal is after five years or more of service, no TDS would be applicable.
  • TDS shall not be deducted in case of transfer of provident fund from one account to another.
  • TDS will not be applicable in case of termination of service due to ill health of member, discontinuation / contraction of business by employer or other cause beyond the control of the member,
  • For computing the period of continuous service, the period of previous employment can also be included, if the accumulated balance while at previous employer is transferred to provident fund of the new employer.
  • If the service period is less than 5 years.If the accumulated provident fund balance is less than Rs 50,000, TDS would not be applicable.

TDS is applicable when

  • Provident fund withdrawal  before five years of completion of service will attract tax deducted at source (TDS) at 10 per cent from Jun 1 2015.
  • TDS will be deducted at 34 per cent if one does not submit PAN.
  • Exemption from TDS has been given to subscribers with no taxable income, provided they submit 15G/15H form. To avoid the levy of TDS, 15H (for senior citizens) or Form No. 15G (other than senior citizens) can be submitted, provided the provident fund amount payable is up to basic exemption limit which for AY 2016-17 is 2,50,000 and Rs 3,00,000 for senior citizens respectively. Form No. 15G or 15H are self-declaration forms that can be furnished by individuals to state that their income is below the taxable limit.

TDS or No TDS amount EPF withdrawal before 5 years is taxable

What are taxes on EPF withdrawal before 5 years of service?

Do note that, if you withdraw your PF balance before the expiry of five years of contribution, then it is taxable in the year in which you withdrew.

    • Your employer’s contributions along with the accumulated interest amount will be taxed as “profits in lieu of salary” under the head Salary.However, relief under Section 89 will be available.
    • Interest accumulated on your (employee) contributions will be taxed under the head “Income from other sources”.
    • The tax deductions claimed on your contributions to EPF  will be revoked or rolled back, and shall be liable to tax.

While filling the income tax form please add income under the appropriate section.

If PF withdrawal is after 5 years then it is exempt from tax. You can still show it Income Tax Form under exempt income section like we show PPF Interest (as shown in our article Filling ITR-1 : Bank Details, Exempt Income, TDS Details)

If TDS is deducted and income is less than basic exemption limit then?

If TDS is deducted and income is less than the basic exemption limit then one can claim TDS while filing ITR form and ask for refund.

Example of Tax on EPF withdrawal before 5 years

Let’s say Rahul joined an organization in Dec 2013 and  quit on 30 Jun 2015. His employer and employee contribution as per UAN passbook is given below. Click on Image to enlarge. Thanks to our reader for sharing his UAN passbook.

UAN Passbook showing Employer Employee Share of EPF

UAN Passbook showing Employer Employee Share of EPF

  • For AY 2014-15 (FY 2013-14)  Employee Share 17,920 Employer Share in EPF 15,756
  • Interest earned on Employee Share  147 Employer Share 123
  • For AY 2015-16 (FY 2014-15)  Employee Share 72,576 Employer Share in EPF 61,830
  • Interest earned on Employee Share   4,413 Employer Share   3,884
  • For AY 2016-17 (FY 2015-16)  Employee Share 18,816 Employer Share in EPF 15,066
  • So he has to add  Employer Share in EPF 15,756 for AY 2014-15, AY 2015-16 and AY 2016-17 109,312(17,920 +  72,576 +18,816 ) . Interest on Employer’s share 123+3884. He can reduce tax outgo on the employer share and interest using section 89.
  • Interest accumulated on employee’s contribution will be taxed as Income from Other sources: 147 + 4,413
  • If he has claimed 17,920 as the deduction under 80C then he has to reverse that. By using the 17920 as 80C deduction his taxable income would have reduced hence his tax. So the tax he saved will now have to be shown. This reversal has to be taken in for every year. For example, his income in AY 2015-16 was 8.25 lakh and he had claimed 80C deduction of 1 lakh which included  72,576. Unless has made other investments where he can claim 72,576 he would not have to calculate the tax without the deduction.
  • So on 8.5 lakh due to 1 lakh tax deduction, his tax liability was Rs 77,250. Now without 72,576 his 80C deduction is reduced to 27,424(1,00,000 – 72,576) so his tax liability became 89,515 that is increase of 16,939. He has to pay tax on this income.

What is relief under section 89?

When salary or other income arrears are received in any particular year, one’s tax liability for that year increases. Simply because one’s total income for that year has increased. But having to pay a higher tax on account of arrears is unfair to the taxpayer. Our Income tax law has taken the same into consideration and allows a tax deduction under Section 89(1) for this additional tax burden on the taxpayer.  It involves ascertaining the two amounts of tax, the first is the amount of tax applicable to the total income, including the extra amount in the year of receipt. The second is calculating the amount of tax by adding the arrears to the total income of the years to which they relate. The difference between the two amounts is the deduction allowed.

Say, you earn Rs.10 lakh a year in the financial year (FY) 2014 and receive an arrear of Rs.4 lakh for FY13. Your total salary in FY13 was Rs.8 lakh.

For FY14, without the arrears, your tax liability will be Rs 1.34 lakh, and with arrears (total salary of Rs.14 lakh), it will become Rs.2.57 lakh. This is a difference of Rs.1.23 lakh.

Now, we have to calculate the tax incidence for FY13, on your salary of Rs. 8 lakh. Without the arrears, you paid a tax of Rs.92,700, and with the arrears (total salary of Rs.12 lakh) you would have paid Rs.1.95 lakh as the tax. This is a difference of Rs.1.03 lakh. So, the relief that you can get under section 89 is Rs.20,600 (Rs.1.23 lakh – Rs.1.03 lakh).

You will have to fill up Form10E with these details and then submit it to your current employer to claim the relief. Keep your salary slips handy to provide as proof of receipt of the arrears. But do keep in mind that only if the tax paid is higher will you be able to claim this relief. If you do not have to pay excess tax due to the arrears, then you do not get the relief.

Summary:

  • An employee should not be in employment for two months after resigning if he has to withdraw his Provident Fund amount. 
  • Provident fund withdrawal before five years of completion of service will attract tax deducted at source (TDS) at 10 per cent from Jun 1 2015.
  • TDS will be deducted at 34 percent if one does not submit PAN.
  • Exemption from TDS has been given to subscribers with no taxable income, provided they submit 15G/15H form.
  • TDS or No TDS amount EPF withdrawal before 5 years is taxable
  •  if you withdraw your PF balance before the expiry of five years of contribution, then it is taxable in the year in which you withdrew.

Related Articles:

All About EPF, EPS, EDLIS, Employee Provident Fund

All about UAN

If you have withdrawn from EPF before 5 years, please do share yoryouru experience and tax calculation to benefit other readers.

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