Calculating the Amount of Tax Applicable on a PF Withdrawal
When it comes to calculating the amount of tax applicable on a PF withdrawal, it’s crucial to know the rules and regulations. The first step is to calculate your eligibility. The five years of employment you’ve had with your previous employer will be counted towards this calculation.
Withdrawals from your PF account are tax-free if you have been working for five years in the same organization. In addition, interest earned on PF accounts is also tax-free. However, be aware that the amount you invest is tax-free only if you’ve worked for the employer for five years.
Moreover, your EPF withdrawal can be made if you need to pay for medical expenses. However, it’s important to note that you can’t withdraw the entire amount until you reach the age of 58. After that, you will have to apply for a claim for final settlement.
The TDS you pay on an EPF withdrawal is not your final tax liability. You’ll need to calculate your tax liability again. In some cases, you may even get a refund. This is because you have to deduct your employer’s contribution from your 80 C contribution, plus any interest you earn. After doing this, you’ll get back your difference, minus the TDS that you paid on the contributions.
The amount of tax that is taxable on an EPF withdrawal depends on the circumstances. In most cases, the employer’s contribution is tax-free if it’s under 12%. However, if the contribution is above 12%, it’s taxable as income from salary. In addition, the interest earned on the PF is taxed as income from other sources if it exceeds 9.5%.
To avoid TDS from being deducted on an EPF withdrawal, employees should consider not withdrawing the money in the first place. Instead, they should transfer the money to their new employer so that the corpus has time to compound. Another option is deferring withdrawals for five years. Withdrawals after five years are tax-free. Moreover, there’s no TDS on withdrawals that are less than Rs 50,000.
Moreover, the withdrawal amount from an EPF will not be subject to TDS if you have five years of continuous service. This rule applies to both employer and employee contributions, as well as the contribution amount itself. This way, you won’t have to worry about TDS until you retire. If you can meet these requirements, you’ll be able to withdraw a portion of your EPF funds tax-free, which is beneficial for both you and your employer.
The second requirement is that you should file a revised Income Tax Return if you’re withdrawing money before five years have passed. To file for a revised return, you must visit NSDL’s tax payment page and select the financial year. After that, you’ll have to approach the assessing officer to pay the taxes. Although it sounds simple, there’s a lot of complexities involved in calculating the amount of tax you’re liable to pay. If you’re unsure, you can seek help from a tax consultant.