Section 192A

Section 192A of the Income Tax Act, 1961 introduced in 2015 requires tax to be deducted at source on provident fund withdrawals. This means that when you withdraw money from your provident fund, tax is deducted before you receive the amount. It follows Section 192 of the Act, which deals with tax deductions from salaries.

What is Section 192A?

Section 192A of the Income Tax Act deals with TDS on premature withdrawal from the Employee Provident Fund or EPF. This means that if you withdraw your EPF before completing a certain period, EPF authority is required to deduct some tax before giving you the money.

This provision was added to the Income Tax Act in 2015 through the Finance Act. Essentially if you withdraw your EPF prematurely and do not meet certain conditions specified in rules, tax will be deducted from amount you receive.

EPF authority acting as deductor, must deposit this deducted tax with the government within a week of the following month in which tax was deducted. However if tax is deducted in March, it can be deposited by the 30th of April.
 

TDS Rate on PF Withdrawal

Under TDS Section 192A, when you withdraw money from your Employee Provident Fund or EPF, entity handling your withdrawal will deduct tax at a rate of 10%. However if you don't provide your PAN or Permanent Account Number, they'll deduct tax at higher rate, which is currently 34.608%.

Now in addition to knowing the tax rate on EPF withdrawal, it's important to understand deduction limit to ensure you can benefit from it fully.

TDS Deduction Limit

When you receive lump sum of money that includes taxes, usually if that tax amount is more than Rs. 50,000 a portion of it will be deducted at source or TDS. However, there are some situations, as outlined in Section 192A of the Income Tax Act, where TDS isn't deducted. It's important for entities to be aware of these exceptions so they can handle their finances accordingly.

Exemptions Under Section 192A

Here are the circumstances under which tax is not deducted under Section 192A of the Income Tax Act:

1. If your total EPF withdrawal amount is less than Rs. 50,000.
2. If you withdraw your EPF after working continuously for at least 5 years.
3. When you transfer your EPF amount from one account to another due to job change.
4. If your employment ends because specific project is completed and you've worked only for that project. However, this doesn't apply if your job ends for other reasons like termination or employer shutting down.
5. If you submit either Form 15G or Form 15H along with your PAN or Permanent Account Number.
6. If you've worked for more than 5 years in an organization, you don't need to submit PAN, which also means you don't need to submit Form 15G or Form 15H.
7. If you were terminated from your job due to ill health, business closure, or project completion, you don't need to submit PAN because your earnings won't be subject to Tax Deducted at Source or TDS.

Deduction of TDS on Withdrawal from Provident Fund

In the 192A TDS Section, it's stated that tax will be deducted at source if your provident fund balance exceeds Rs. 30,000 when you withdraw it. This applies especially if you've been with your employer for less than 5 years.

When you withdraw money from your provident fund, TDS will be deducted under certain circumstances:

1. If you transfer your provident fund balance from one account to another usually when you change jobs.
2. If your employment ends due to reasons like ill health, project completion or your employer's business stopping.
3. If you withdraw after continuously working for 5 years without changing jobs in between.

So, if any of these situations apply to you, expect TDS to be deducted when you receive your provident fund payout.

Conclusion

Section 192A of the Income Tax Act focuses on early withdrawals from the Employees Provident Fund. If you withdraw money early like before completing 5 years of continuous service, law requires a deduction of TDS at a rate of 10%. If you haven't provided your PAN details, the TDS rate might be even higher. However there are some deductions available for small withdrawals. Understanding this section of the law can help you manage your taxes more effectively when dealing with your provident fund.