look news india
Employees’ Provident Fund Organization (EPFO) is going to give a historic gift to its approximately 8 crore active subscribers by the end of this month. Now you will not have to wait for weeks or go through lengthy paperwork to withdraw money from your PF account in times of emergency or need. EPFO is preparing to launch a highly advanced dedicated mobile app, which will be directly linked to your bank account. With the help of this app, subscribers will be able to withdraw money directly from their PF account through BHIM and other major UPI platforms or ATM. This step is going to prove to be a big game changer towards Digital India and financial accessibility.
You will be able to withdraw up to 75% of your funds in a jiffy, know the huge amount at stake
As soon as this new and modern facility of EPFO goes live, members will be able to easily withdraw up to 75 percent of the total amount deposited in their PF account. If we look at the figures, currently a total of 30 crore subscribers are registered in the books of EPFO, out of which the number of active members who contribute regularly is around 7.5 crore. This decision is also very important because EPFO currently manages a huge fund of about Rs 26 lakh crore. With this new system, while the common working person will get liquidity i.e. instant money at the time of need, the speed of digital transactions in the country will also get a new boost.
PF withdrawal through ATM and UPI is easy, but understand this maze of tax.
Financial and tax experts have praised this extremely easy withdrawal facility, but have also given an important warning to the subscribers. Experts say that easy withdrawal does not mean that you can withdraw money whenever you want without thinking. The strict income tax rules related to PF withdrawal will also be fully applicable to ATM or UPI transactions. If you withdraw a large amount in a hurry without understanding these tax intricacies, you may have to face a notice from the Income Tax Department or a huge tax deduction.
Less than 5 years of service? So there will be huge tax shock on PF withdrawal
According to income tax rules, if an employee has completed 5 years of continuous employment, no tax is levied on any amount he withdraws from the PF account. It is completely tax-free. The real problem comes with those employees who change jobs before completing 5 years of continuous service or withdraw money from PF for some reason. In such cases, the entire amount withdrawn is considered as your total taxable income for that year, and tax is then calculated on it as per your existing tax slab.
The benefit of old savings will be reversed, know how it will affect your pocket
When you withdraw PF money before 5 years, the employer’s contribution, the interest received on it and your own contribution on which you had once claimed tax exemption under Section 80C, everything comes under the ambit of tax. In simple words, all the tax benefits you got in the previous years get reversed i.e. become zero. For example, suppose a person withdraws Rs 5 lakh from his PF after 4 years of service. If his PAN card is linked to the EPFO account, then at the time of withdrawal, EPFO will directly deduct 10 percent TDS i.e. Rs 50,000. Keep in mind, if your PAN card is not updated with the PF account, then this TDS rate will directly increase to 34.60 percent, which is a huge loss.
Understand the mathematics of your total tax liability and slab like this
The 10% TDS deducted by EPFO is not your final tax. When you file your Income Tax Return (ITR) at the end of the year, this amount of Rs 5 lakh will be added to your total annual income. Suppose you fall in the 20 percent tax bracket, then your total tax on this Rs 5 lakh will be Rs 1 lakh. Since TDS of Rs 50,000 has already been deducted, you will have to pay the remaining Rs 50,000 while filing ITR. Whereas, if you fall in the highest tax slab of 30 per cent, your total tax liability will be Rs 1.5 lakh, which means you will have to pay a separate tax of Rs 1 lakh even after deducting TDS. So, always keep this tax math in mind before availing this great facility of digital withdrawal.