Bad news for those withdrawing PF after leaving the job! Government is imposing heavy tax

Today we will talk about your PF (Provident Fund) account, which is a part of your hard-earned money and which is kept safe for the future. This is a kind of savings which becomes support for your old age.

When a person works in a private job, a small part of his salary is deposited in his EPF account every month. The amount of money that goes into the employee’s account, the same amount is also deposited by the company. The government also gives interest on this deposited money every year, due to which your retirement fund keeps increasing gradually.

When you retire, you get all this money at once and the best part is that there is no tax on it. If your service lasts for more than 10 years, you also start getting pension.

Is there tax on withdrawing PF money before retirement?

Now the question arises whether one has to pay tax even if there is compulsion to withdraw money before retirement?

The answer is, yes, but with some conditions. If your job has not been completed for 5 consecutive years and you withdraw money from your PF account, then it may be taxed.

Let’s understand this a little more easily:

• If you leave the job before completion of 5 years and withdraw the PF money, you may have to pay tax on that amount.
• But, if the amount withdrawn is less than Rs 50,000, then TDS (Tax Deducted at Source) will not be deducted on it.
• At the same time, if you leave one job and join another and get the money from your old PF account transferred to the account of the new company, then no tax is deducted, even if your job has not been for 5 years. Often people withdraw their PF money while changing jobs, which is not right because it is a savings made for your future.

How much tax is deducted?

If your employment is less than 5 years and you withdraw more than Rs 50,000, then TDS is deducted at the rate of 10%. While withdrawing money you have to provide your PAN card number. If you do not provide PAN card information, this deduction can be up to 20%.

However, if your annual income is not so much that you come under the ambit of income tax, then you can fill and submit Form 15G/15H. By doing this no TDS will be deducted on your PF money.

Overall, PF money is a stick for your old age. You should try not to withdraw it till retirement so that you can get full benefit from it.