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Tax On EPF partial Withdrawal in India

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Contribution towards your EPF or PPF account provides a benefit by way of a deduction under Section 80 C.

It also is good to know what would be the income tax implications of your PF withdrawal or advances.

Basic Rule for PPF or EPF withdrawal

  • You are allowed to withdraw up to 50% of the balance in the EPF account after completion of 5 years.
  • One partial withdrawal is allowed in each fiscal.

Interestingly, EPF withdrawal is taxable under certain circumstances and exempt under certain circumstances.
Let us look at the TDS aspects on Premature EPF withdrawals including Loans.

  • Any premature EPF withdrawal exceeding Rs. 50,000/ attracts TDS. This has been made effective 1st June 2015.
  • All EPF withdrawals made before the stipulated 5 years period fall under the Income Tax purview

EPF – Partial Withdrawals Rules

Partial withdrawals are an option available under the EPF section and can be for many purposes. Some such purposes are enlisted below for clarity.

  • House Purchase
  • Expenses incurred towards Marriage & Education
  • House construction
  • Medical treatments
  • Home Loan repayment
  • Home renovation and repairs at home

Clauses applicable – Partial EPF withdrawals for different purposes

Irrespective of the purpose of partial withdrawal of EPF, some basic rules need to be adhered to by all concerned. Such clauses are enlisted below for clear understanding for each purpose.

  • If you are planning to partially withdraw your EPF amount for the purpose of flat or house purchase including an already built one or buying a site or for the construction of a new flat or house,
    • You must have completed a minimum of 3 years of service
    • You must have made a minimum of 3 years contribution to your EPF account
    • The permissible amount that can be withdrawn is 90% of the EPF balance or the total cost of your commitment which is lesser on a comparative scale
    • Withdrawal for such purposes is allowed only once in a lifetime
    • No declaration needs to be submitted for EPF partial withdrawal purposes under this category. However, In order to take an EPF advance for the purchase of flat or house an Application Letter needs to be submitted to the Commissioner of RO/SRO.
    • These clauses are applicable for properties held individually by the Employee, his spouse or jointly by both
  • If you are planning to partially withdraw your EPF amount for the purpose of altering or making improvements in the flat or house you are dwelling in, then
    • You can do so only after 5 years after the construction of the house or flat
    • The permissible amount that can be withdrawn is Employee share of EPF along with the interest component or 12 months of basic wages of the Employee including Dearness Allowance (DA) or the actual cost of alterations whichever is the lowest
    • Withdrawal for such purposes is allowed only once in a lifetime
    • No declaration needs to be submitted for EPF partial withdrawal purposes under this category
    • These clauses are applicable for properties held individually by the Employee, his spouse or jointly by both
  • If you are planning to partially withdraw your EPF amount for the purpose of Home Loan repayment, then
    • You must have completed a minimum of 10 years of service
    • The permissible amount that can be withdrawn is 100% EPF balance or the total home loan outstanding amount or 36 times of monthly salary whichever is lower
    • Withdrawal for such purposes is allowed only once in a lifetime
    • Needs to submit Loan Statement to the Employer from the Institution to which loan amount is due along with Form 31
  • If you are planning to partially withdraw your EPF amount for the purpose of Medical treatments, then
    • No minimum years of service are stipulated as a mandatory clause for treatment of self or for the family
    • The permissible amount in both cases is a maximum 6 months basic salary jointly with DA (Dearness Allowance) or the Employee share of PF contribution including the interest it has earned till then.
    • Partial withdrawal of EPF for Medical purposes is allowed as many times as any Medical emergency arises.
    • Certificate C must be produced approved by the Doctor and the Employer
  • If you are planning to partially withdraw your EPF amount for the purpose of Education or Marriage expenses, then
    • You must have completed a minimum of 7 years of service
    • The permissible amount that can be withdrawn at any point of time is 50% of the EPF contribution along with the interest component it has earned
    • Withdrawal for such purposes is allowed three times during your service period
    • In the case of partial withdrawal of EPF for marriage purposes, the concerned Employee must declare the same in Form 31
    • In the case of partial withdrawal of EPF for education purposes, a declaration is to be taken from the Head of the Institution where the higher education is to be carried out must be obtained about the course of study and the approximately estimated expenditure. This must be submitted along with Form 31
  • If you are planning to partially withdraw your EPF amount for the purpose of purchasing equipment that can minimize the hardships caused by any type of handicap, then
    • No minimum years of service are stipulated as a mandatory clause
    • The permissible amount that can be withdrawn at any point of time is 6 months Basic wages along with DA (Dearness Allowance) or the EPF contribution along with the interest it has earned till then or the actual cost of the equipment to be bought – whichever is the lowest.
    • Withdrawal for such purposes is allowed once in three years
    • In the case of partial withdrawal of EPF for the management of handicap purposes, the concerned Employee must get a Medical Certificate from an approved Medical Practitioner and submit along with Form 31
  • If an Employee who is more than 54 years of age partially withdraws from EPF within a year from his date of retirement, he is allowed to withdraw a maximum of 90% of contribution irrespective of the purpose of withdrawal.

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