EPF Withdrawal: The Employees Provident Fund (EPF) is a government scheme that ensures the financial security of employees after retirement. The Employees’ Provident Fund Organisation (EPFO) is in charge of administering it. Both employees and employers contribute a certain percentage of the employee’s basic salary and dearness allowance to the EPF account each month. These funds, along with the interest earned, can usually be withdrawn once the employee retires. However, it is important to note that EPF withdrawals are taxable under certain circumstances, just like other sources of income.
EPF Withdrawal: A Step-by-Step Guide
EPF can be withdrawn under various conditions. Firstly, at retirement, which is typically at the age of 55 or above, Secondly, one year before retirement is also a valid time to withdraw. Additionally, if an employee becomes unemployed, they can withdraw their EPF after one or two months of unemployment.
The taxability of EPF withdrawals depends on several factors. First, it is determined if the employee has previously claimed deductions for their EPF contributions under Section 80C. If deductions have been claimed, employee contributions are generally not taxable. However, if no deductions have been claimed, additional tax may be payable on those contributions. Second, whether the employee has completed five years of service with the company also affects taxability. If the withdrawal is made before completing five years of service, tax deducted at source (TDS) will be applicable. However, if the withdrawal is made after completing five years of service, no tax is levied on the withdrawal amount.
It is worth mentioning that EPF accounts can be merged using the Universal Account Number (UAN). This allows employees who have worked for multiple companies to integrate their work experience from different companies. By merging their accounts, the total work experience is calculated as a whole rather than separately for each company.
In conclusion, EPF withdrawals are a valuable source of income for retirees. However, it is crucial to be aware of the tax implications before making a withdrawal. Employees can seek guidance from their employer or the EPFO for more information on EPF withdrawals and taxability.