DSIJ Mindshare

New TDS norms for PF withdrawals from June 1

There will be no tax deduction for provident fund (PF) withdrawals of up to Rs 50000 from June 1. The government has increased threshold limit of PF withdrawal for deduction of Tax Deducted at Source (TDS) from existing Rs 30000 to Rs 50000. This provision would come into effect from June 1, 2016, providing relief to subscribers of retirement fund body EPFO (Employees' Provident Fund Organisation).

The government had introduced the proposal to deduct TDS on PF withdrawals in order to discourage pre-mature withdrawals and to promote long-term savings. According to existing provisions, TDS is deducted at the rate of 10 per cent provided PAN is submitted.

However, in case Form 15G or 15H is submitted by the member, TDS is not deducted. These forms are to declare that their income would not be taxable after receiving payment of their PF accumulations from the retirement fund body.

However, there are certain exceptions to deduction of TDS by EPFO. TDS shall not be deducted in case of transfer of PF from one account to another PF account. There will be no tax levied if employee withdraws PF after a period of five years.

On the other hand, from June 1, the taxpayers will have to pay imposed two new cesses namely Krishi Kalyan Cess (KKC) and Infrastructure Cess.

Finance Minister had in the past raised service tax from 12.36 per cent to 14 per cent, during the last year budget. Then Swachh Bharat Cess at 0.5 was introduced in November 15, 2015, which raised the service tax to 14.5 per cent. The service tax rate now would stand at 15 per cent.

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