Section 192A of Income Tax Act: Tax Deductions On Premature withdrawal of PF
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
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.
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.
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.
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
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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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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