Section 192A of Income Tax Act: TDS on PF withdrawals

Individuals may often require a sudden influx of cash. Under such circumstances, people with no other means might decide to withdraw from their EPF accounts prematurely. However, before initiating such a withdrawal, they must make sure to check Section 192A of the Income Tax Act.

What is Section 192A Of Income Tax Act?

Section 192A of the Income Tax Act is related to the TDS or Tax Deducted at Source applicable on premature withdrawals from PF. The provision is a comparatively newer addition to income tax rules set by the Indian government and got introduced on June 1 2015. According to this tax rule, the deduction of tax takes place at the time of payment of the EPF accumulated balance due to a particular employee.

Within one week after the end of a particular month in which TDS deduction takes place, the entrusted deductors need to deposit TDS with the Central Government.

What Is the TDS Rate on Premature Withdrawal of EPF?

As per the norms of Section 192 of the Income Tax Act, TDS is deducted at the rate of 10% by the entrusted deductors. Here, an essential point you must note is that the TDS deduction rate changes in case a government employee fails to produce his/her PAN card. In such a scenario, the deduction takes place at a marginal rate.

Note that in case an employee furnishes Form 15H and 15G, TDS deduction will not take place. Now, apart from the data regarding the TDS rate on premature provident fund withdrawal, individuals should also acquire information about this deduction limit. Refer to the following section to obtain these details.

Also read: Form 15G & 15H: How To Save TDS On Interest Income

What Is the TDS Deduction Amount and Its Limit?

A single lump sum tax component needs to exceed Rs. 50,000 to qualify for TDS deduction. Any amount below that will not be applicable for TDS deduction. However, there are several other scenarios in which TDS deduction under Section 192A of the Income Tax Act does not happen. To account for it, individuals and entities must be aware of these available exceptions.

Exceptions under Section 192A

Here are some situations when TDS is not deducted the way it usually happens as per Section 192A of the IT Act:

When the total amount of EPF withdrawal does not cross Rs. 50,000
In case a particular employee shifts his/her job, and the EPF amount gets transferred to a different account from the previous one
If the withdrawal of EPF is finally happening after at least 5 years of continuous service
In case employees furnish PAN card along with Form 15H or 15G

In case the employee gets terminated because of the non-completion of a project, TDS deduction does not take place. Additionally, a particular employer’s discontinuation of the venture also falls under such circumstances.

Note that employees working for a specific organisation for more than 5 years do not need to submit a PAN card at the time of withdrawing from the provident fund. Therefore, they can also skip producing the aforementioned forms at that time.

Additionally, keep in mind that individuals who lost their employment due to discontinuation of employer’s business, ill-health or incomplete submission of their allocated projects do not need to submit a PAN card.

Know about TDS Return and Due Dates

As mentioned earlier, once the TDS deduction takes place, within one week from that following month, the deductors are required to deposit TDS with the government. In that case, as per Section 192A of the IT Act 1961, they will have to file TDS returns. It should be filed (quarterly) either on the TRACES website or by submitting Form 26Q, which is a TDS statement.

Here is a tabular representation of dues dates for TDS filing with Form 26Q for different quarters.

Quarter	Dues Date
April – June	July 31
July – September	October 31
October – December	January 31
January – March	May 31

Now, by referring to this table, you can easily figure out the due date for filing TDS returns as per Section 192A of Income Tax Act 2020-21.

Final Word

Only after calculating your TDS liabilities under Section 192 of the Income Tax Act, should you go ahead with premature EPF withdrawal. Following such a process can ensure minimal hassle for the EPF account holders.

FAQs Section 192A of the IT Act

Q1. How much TDS will I have to pay if I withdraw Rs. 20,000 from my EPF balance of Rs. 25,000?

Ans: 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.

Q2. Where to show income generated from the EPF account in ITR?

Ans: 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.

Q3. What is the provision of TDS on EPF interest post-retirement?

Ans: 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.

Q4. Which parties can deduct TDS as per Section 192 of ITA?

Ans: Employers can deduct TDS under Section 192 of the IT Act. Here are some types of employers who can do so:
Individuals
Public or private companies
Trusts
Hindu Undivided Families
Co-operative societies
Partnership firms

Q5. How is the TDS rate decided if an employee fails to furnish his/her PAN?

Ans: 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%

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