Tax Deducted at Source (TDS) is a mechanism where tax is collected at the point of certain payments and deposited with the government on the recipient's behalf. Section 192A of the Income-tax Act governs TDS on premature epf withdrawal.
This guide sets out the TDS rate under Section 192A, the threshold that triggers deduction, who must deduct, and the deposit and return-filing compliance that follows.
What is Section 192A?
TDS under 192A applies when an employee withdraws from the Employees' Provident Fund before completing five years of continuous service.
Rate, threshold and who deducts
| Nature of payment | Premature EPF withdrawal |
|---|---|
| TDS rate | 10% (20% if PAN is not furnished) |
| Threshold | Withdrawal of ₹50,000 or more |
| Who deducts (deductor) | EPFO / trustees of the PF |
| Whose income (deductee) | Employee |
| Time of deduction | At the time of payment of the accumulated PF balance |
Key points
- No TDS if the withdrawal is below the threshold or service is five years or more.
Compliance for the deductor
- Deduct at the right time. Deduct TDS on premature epf withdrawal at the time of payment of the accumulated pf balance.
- Deposit to the government. Pay the deducted tax by the 7th of the following month (special dates apply for March and for Form 26QB).
- File the TDS return. Report the deduction in the quarterly TDS return (Form 24Q/26Q/27Q as applicable) on the TRACES/e-filing system.
- Issue the TDS certificate. Give the deductee Form 16/16A so they can claim credit in their return.
How the deductee claims credit
TDS deducted under Section 192A appears in the deductee's Form 26AS and Annual Information Statement (AIS). It is adjusted against the final tax liability when the deductee files their income tax return, and any excess is refunded.
Frequently asked questions
How do I avoid TDS on PF withdrawal?
Complete five years of continuous service, or submit Form 15G/15H if your total income is below the taxable limit.
What happens if TDS is not deducted?
The payer can face disallowance of the expense, interest at 1%–1.5% per month, and penalties. It is important to deduct and deposit on time.
By when must TDS be deposited?
Generally by the 7th of the month following deduction (30 April for amounts deducted in March), with separate rules for property-related challans.