Whenever you change jobs, do not think of withdrawing money from EPF or withdraw money. It would be good to transfer the EPF money of the previous company to the new company. This will save you from huge tax losses.
You must have heard about Employee Provident Fund i.e. EPF that there is tax exemption on the money deposited in it. But this exemption is not for every situation. If you make partial or full withdrawal from the EPF account before maturity, then that amount is taxed.
Its biggest and main rule is that if EPF money is withdrawn before completing 5 consecutive years of service, then TDS is deducted on it. One good thing is that you do not necessarily have to work for 5 consecutive years in the same company. TDS is not deducted on EPF withdrawal even after changing the institution and completing 5 years.
The second rule says that let’s say that you are working in a company on a consultant or contract for 2 years. During this your PF is not deducted. After two years, the company took you on the payroll and became a permanent employee. With this, your PF deposit also started. After completing 5 years in this company, you left your job and joined some other company. You suddenly needed money and withdrew money from PF. You came to know that TDS has been deducted on PF withdrawal.
Keep this special thing in mind
You must be thinking that worked in the previous company for 5 years and after that withdraw money from PF, then why TDS was deducted on withdrawal. The answer is that even though you have worked for 5 years in the company, only 3 years of permanent work will be counted. This is because your PF has been deposited during that time and not for the entire 5 years. Troubled by this tax deduction, you must be thinking of some way to save it. So let us tell you the solution for this.
Ways to save TDS
- Whenever you change jobs, do not think of withdrawing money from EPF or withdraw money. It would be good to transfer the EPF money of the previous company to the new company. This will save you from huge tax losses.
- In any case, try not to withdraw EPF money during 5 years of service. If this money is withdrawn after 5 years, then no TDS will be deducted on it.
- Without withdrawing PF money, it is not going to work and you have made up your mind to withdraw it, then try to take less than Rs 50,000. No TDS is deducted for withdrawing money less than this.
- Keep in mind that if you have withdrawn less than Rs 50,000 from EPF, but you fall in the taxable bracket, then you have to show the withdrawal amount in ITR. Otherwise tax can be deducted on withdrawal.
- If you have withdrawn more than Rs 50,000 from PF, then 10% TDS will be deducted on it. The only way to save it is to fill the form 15G or 15H.
