Section 192A of the Income Tax Act is related to TDS or Tax Deducted at Source on premature withdrawals from PF. This is a comparatively newer addition to the existing income tax rules. It was added on June 1, 2015 in accordance with the recommendations of the Finance Act 2015. According to this section, the deduction of tax must be made before the amount withdrawn from an Employee’s Provident Fund (EPF) account is transferred to the employee. The rule further underscores that the tax deducted at source in a particular month must be deposited with the government by entrusted deductors within a week into the next month.
Section 192A of the I-T Act, 1961 states that no tax will be deducted at source if the total amount withdrawn from an EPF account is less than or equal to ₹50,000. Any amount exceeding this limit will be taxed as per the existing rules. We have discussed the exemptions allowed under this rule in detail in a later section.
Did you know that the tax exemption limit for premature EPF withdrawals was increased from ₹30,000 to ₹50,000 in 2016? This was achieved through an amendment to the section introduced by Finance Act 2016.
Section 192A of the Income Tax Act, 1961 states that upon premature withdrawal of Employee Provident Fund, an employee is liable to pay a TDS of 10%. However, if the employee is unable to furnish their PAN details, then tax will be deducted at source at the maximum marginal rate of 34.608%.
Another important point to consider is that if an employee provides Form 15G and 15H, then TDS will not be deducted on the EPF withdrawal as per the provisions of section 192A. Let us now look at some exemptions provided under section 192A of Income Tax Act.
The following are some probable scenarios in which TDS will not be deducted as per the provisions of the section in question:
As mentioned already, entrusted deductors will have to deposit the amount deducted as tax under Section 192A of the I-T Act, 1961 in a dedicated Central Government account within a week of the following month. For TDS deducted on premature withdrawal of EPF in March, however, the deadline for depositing the tax is April 30.
TDS deductors have to file returns by submitting Form 26Q on a quarterly basis. The due date for each quarter is given below:
|Q1: April – June||July 31|
|Q2: July – September||October 31|
|Q3: October – December||January 31|
|Q4: January – March||May 31|
Now that you have read this blog, hopefully you understand your TDS liabilities better under Section 192 of Income Tax Act, provided you need to make a premature EPF withdrawal. Consider the amount you wish to withdraw, the rate of tax that will be applicable in your specific case, and the exemptions available under the provisions of this section.
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As per Section 192A of IT Act, you will only need to pay TDS if your EPF account balance is more than Rs. 30,000 during withdrawal. In this case, the total balance is Rs.25,000. Therefore, TDS will not be applicable.
When you withdraw funds from your EPF account, you have to report it under Section 10(12). Keep in mind that such PF income is exempt from some taxes if you are employed in your current organisation for a period of 5 years or more.
Any interest generated from your EPF account after retirement is taxable. Section 194A provisions will be applicable in such cases. The reason for TDS deduction is the non-existence of an employee-employer relationship.
Employers can deduct TDS under Section 192 of the IT Act. Here are some types of employers who can do so:
-Public or private companies
-Hindu Undivided Families
The Income Tax Department of India will deduct TDS at the higher of the following rates under Section 206AA:
-Any specified rate in the Act’s relevant provision
-Any rate that is prescribed in the Finance Act
-At a base rate of 20%
TDS must be deducted under Section 192A when an employee decides to prematurely withdraw their EPF savings. However, the section also provides some exemptions. Scroll up to check the details.
Tax must be deducted by the trustees of the Employee’s Provident Fund Scheme, 1952, which could be the employer or any other person authorised under the scheme to make the pay the accumulated EPF amount to the employee.
The threshold tax exemption limit under Section 192A of Income Tax Act is ₹50,000.
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