Tax Query: How is my EPF withdrawal taxed?

I quit my job during the FY 2019-20 and later joined employment outside India. I withdrew my EPF balance during the year, which accumulated for four years. I received a credit of the amount in March 2020. Also, I left India on 1 November 2019 and did not return during the FY 2019-20. Is the EPF I withdrew taxable?

The EPF balance withdrawn becomes taxable in the case where the period of service is less than five years. For the FY 2019-20, you are resident in India as your stay is more than 182 days. Also, the EPF withdrawn is income earned in India. 

The taxability on the amount received is as follows:

  1. The employer’s contribution and interest on the employer’s contribution get taxed under the head ‘income from salary’.
  2. Your contribution also gets taxed under the head of ‘income from salary’ if you had claimed deduction on the same under Section 80C in the earlier years. The interest earned on your EPF contributions gets taxed as ‘income from other sources’.

The tax calculation is as per the income slab rates applicable for FY 2019-20.

Also Read: Tax Query: How can I set off business loss against other income sources?

I left my job in February 2020 and have not joined any other employment. For FY 2020-21, I do not have any other income. Can I withdraw my EPF balance without TDS by submitting a Form 15G?

The TDS rate applicable for EPF withdrawal is 10% where the amount you withdraw is above Rs 50,000. However, if your period of continuous employment is more than five years, then there is no TDS on the EPF withdrawal. For calculating the period of employment, the service rendered with the previous employer also gets included. In such cases, there must be a transfer of EPF balance from the previous employer to the new employer.

In case of service less than a continuous period of five years, you can submit Form 15G to claim EPF balance without TDS. One of the conditions for submitting Form 15G is that your estimated income for FY 2020-21 should be below the basic exemption limit.

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