New provident fund (PF) withdrawal rule:

 

Finance Minister Nirmala Sitharaman proposed reducing Tax Deduction at Source (TDS) for the taxable portion of the Employees' Provident Fund (EPF) Scheme for non-PAN cases from 30% to 20% when presenting the Union Budget 2023. Other income tax regulations will, however, not change.

 

According to income tax rules, if a PF or EPF accountholder withdraws money from their EPF before completion of five years of account opening, the entire amount is still taxable, and any contributions made above the annual limit of Rs2.5 lakh per annum would also remain taxable.

 

If the PF account is seeded with account holders PAN card then there will be no TDS levied on the withdrawal amount. PF withdrawal amount will get added to the total taxable income of the PF account holder in the year of withdrawal and the tax will become applicable on the basis of income tax slab getting applicable on the PF account holder. However in case of PF account not seeded with account holders' PAN card, TDS is deducted from the net amount available in one's PF account. This TDS rate is currently 30% of the PF withdrawal amount which will come down to 20% from 1st April 2023 or from the beginning of FY24.