Table of Contents
1. Section 192A of the Income Tax Act, 1961?
Section 192A of the Income Tax Act contains provisions relating to TDS on premature withdrawal of accumulated funds in the employee provident fund account.
2. What is Employee Provident Fund?
- Employee provident fund is a retirement savings plan or scheme introduced under the “Employees’ Provident Funds & Miscellaneous Provisions Act, 1952” where an employee contributes a part of his salary (currently – 12% of his wages) every month towards this fund.
- An amount equal to the employee’s contribution will be matched by the employer and the total amount will be deposited into the EPF account of the employee.
- As per the scheme, the employee will receive the lump sum amount accumulated in his/her EPF account along with interest on the accumulated balance post-retirement. In order to promote long term savings, premature withdrawal of provident fund is subject to tax.
3. Who should deduct tax under this section?
Any person authorised under the Employee provident fund scheme, 1952 responsible for paying the withdrawn provident fund amount to the employee should deduct tax under this section.
4. When should the tax be deducted under this section?
Tax under section 192A should be deducted at the time of payment of the lump-sum amount to the employee.
5. What is the rate at which tax is deducted under this section?
- Tax is deducted at the rate of 10%.
- If the employee does not furnish his/her PAN, tax will be deducted at the max marginal rate of 34.608%.
6. What is the maximum limit upto which no tax is deducted under this section?
No tax needs to be deducted under this section if the aggregate amount of such payment made to the employee / payee is less than Rs. 50,000.
7. Circumstances where no tax needs to be deducted under Section 192A?
- Where the amount of accumulated PF withdrawn by the employee is less than Rs. 50,000.
- Where the withdrawal has been done after a continuous service of 5 years.
- Where the employee has submitted Form 15G/ 15H along with PAN.
8. Circumstances where a disruption in service does not constitute a break in continuous service of an employee.
- No tax needs to be deducted under this section where the withdrawal has been done by an employee who has been in continuous service for 5 years
- Where an employee resigns from one employment and joins another before expiry of 5 years – will the amount withdrawn from his accumulated PF balance be taxed under this section?
- If an employee changes his employment, he can transfer the accumulated balance in his PF account through the Universal Account Number. If he has transferred the accumulated balance, the period of previous employment along with the current employment shall be considered as the period of continuous service.
- And if the total years exceed 5 years, no tax needs to be deducted under section 192A.
In case where the service of an employee is disrupted due his ill-health or due to discontinuance of the employer’s business or due to any other cause beyond the control of the employee it shall not be considered as a disruption of continuous service.
9. What is the amount of PF subject to TDS as per section 192A?
As per section 192A, the withdrawn PF accumulation is taxable only if the same is includible in the total income of the employee. the taxability of the amount is as under,
| Component of lump sum payment | Taxable/ Not taxable | Applicability of TDS under section 192A |
| Employer’s contribution | Taxable under the head “Salary” | Provisions of section 192A is applicable |
| Interest on Employer’s Contribution | Taxable under the head “Salary” | Provisions of section 192A is applicable |
| Employee’s Contribution | Not Taxable | No TDS required |
| Interest on Employee’s Contribution | Taxable under the head “Other Sources” | Provisions of section 192A is applicable |