Can Part of EPF Be Deducted as TDS in Un-Exempted Units? Seeking Clarity!

Hi all, can part of the EPF be deducted as TDS? If yes, then how is it possible in an un-exempted unit?

Thank you.

EPF is a retirement benefit for which we get tax exemption on our contributions. Exempted organizations (companies with EPF trusts) deduct TDS when an employee leaves the company and withdraws the money. Typically, most EPF trusts deduct 30% of the EPF amount. In the case of unexempted employers, PF accounts are managed by RPFC. In such cases, RPFC does not deduct TDS on PF withdrawals. However, individuals who withdraw the EPF amount must declare it as income in the financial year since they claimed IT exemption under Sec.80c.

I hope this provides clarification.

Regards,
Ramanjaneya Reddy.G.K

If TDS is already being deducted from my salary, should TDS from my EPF also be justified? Can tax be deducted from the EPF payable before it is deposited via bank challan? (If my EPF is 1000, can the establishment deduct 30% as mentioned above from the EPF being deposited?)

No, they cannot do that. They should be depositing the full EPF amount. In your example, $1000 should be deposited.

Apart from this, the EPF deducted amount will be considered under 80CC for tax exemption.

Can you please provide the reason for the first query? Is TDS from my EPF justified? Is EPF taxable if it exceeds one lakh?

If I am providing services to a company and getting paid as an employee, and the company is deducting TDS for the services I provide, is it justified for the unexempted company to deduct TDS on my EPF? (I am not well-versed in Income Tax Law, so please correct me if I am mistaken).

When you are earning a salary, your gross salary will be considered as income. For example, if your gross salary is Rs. 50,000 per month and your Basic Salary is Rs. 20,000 on which PF deductions are Rs. 2,400, income tax should be calculated on the gross salary. They should deduct IT on Rs. 50,000. However, the employer will deduct only on Rs. 47,600 since your PF amount is exempted from IT (as it is a retiral benefit). But when you withdraw before retirement, that amount will be considered as normal income; hence, TDS will be applicable on the withdrawal.

In case you do not fall under the 30% IT slab, you can claim a refund from the IT department by submitting your IT returns with the help of the TDS certificate (issued by the PF trust) and Form-16.

Regards,
Ramanjaneya Reddy.G.K

PF Contribution Limit

But you should know that the PF limit is ₹6,500 (wages), so it must not exceed ₹780.00 (as 12% of ₹6,500). There is a clause that states beyond the ₹6,500 limit, the PF deducted will only be from the employee's part, while the employer contribution will remain the same. This is called voluntary PF contribution by the employee.

Retirement Benefit Aspect

One-third of the PF deductions are for retirement benefits. Therefore, the remaining two-thirds are taxable, and if it exceeds ₹1 lakh, it is taxable.

Is there a specified time period for TDS deductions concerning years of service?

Hi, may I know if the RFFO deducts TDS on PF withdrawals (of less than five years of contribution)? Or do we need to show it in our income?

Regards,
Srinivasa Brahma