Tax on PF withdrawal before 5 years

1. When PF Withdrawal Becomes Taxable

• If you withdraw before 5 years of continuous service (including transfers between employers), the withdrawal becomes fully taxable.

• The breakup is:

  • Your own contribution → Not taxable (since you invested from after-tax salary), but any Section 80C benefit you claimed in earlier years gets reversed.

  • Employer’s contribution + interest on employer’s contribution → Fully taxable as salary income.

  • Interest on your own contribution → Taxable as income from other sources.

2. TDS Deduction

• If withdrawal > ₹50,000 and before 5 years:

  • TDS @ 10% is deducted (if PAN given).

  • If no PAN or wrong PAN, then TDS @ 30% + surcharge + cess (May cross 50%).

• That’s likely why your company/EPFO deducted such a high amount — they may have treated it as “no PAN case” or used the highest marginal rate.

Important

• The high TDS doesn’t mean you’ll permanently lose 50%.

• Actual tax depends on your slab.

• File your ITR correctly — you’ll get refund for excess TDS.

Thanks
Damini

The excessive TDS likely happened because:

• No PAN submitted: TDS at 34.608% (maximum marginal rate) instead of 10%

• Taxable components: Employer contribution and interest are fully taxable when withdrawn before 5 years

Key Conditions

• TDS applies only if withdrawal >₹50,000 and service <5 years

• No TDS if service period exceeds 5 years

• Transfer to new employer avoids TDS completely

How to Avoid High TDS

• Always provide PAN card to get 10% rate instead of 34.608%

• Submit Form 15G if total income is below taxable limit

• Consider transferring PF instead of withdrawing

The 50%+ deduction was likely due to missing PAN submission, triggering the highest TDS rate plus taxation on employer contributions and accumulated interest.

What was the date of withdrawal of PF?