The Employees' Provident Fund Organisation (EPFO) is set to introduce UPI and ATM-based withdrawal facilities for subscribers before June end. Under the facility, subscribers will be able to withdraw their Provident Fund (PF) money via EPF-linked ATMs and UPI apps under the upcoming EPFO 3.0 digital platform.
Once live, subscribers can withdraw up to 75% of their PF balance instantly. The feature will reduce delays and paperwork while improving transparency and accountability. Subscribers will be issued EPF-linked ATM cards by the EPFO. The cards will function similarly to regular debit cards and enable members to withdraw eligible PF funds.
How Will The Facility Affect Taxes?
If a taxpayer has completed five years of continuous service, including tenures with earlier employers, their withdrawal is largely tax-free if the PF account was transferred rather than closed.
However, the situation is different when a taxpayer dips into their PF account early.
Withdrawing money from the PF account before the five-year mark means that the amount will be treated as income and taxed as per a subscriber's applicable slab. This includes the accumulated interest, employer's contribution, and any portion of their own contribution on which the taxpayer had earlier claimed a deduction under Section 80C.
Basically, the entire tax benefit is reversed.
TDS will apply to premature withdrawals over Rs 50,000.
Irrespective of the five-year rule, the interest earned on employee contributions going beyond Rs 2.5 lakh in a financial year is taxable. This is applicable for contributions made on or after Apr 1, 2021.
If the total income, including the EPF withdrawal, falls below the applicable basic exemption limit, there is no tax liability.
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Under the Income-Tax Act, the transfer of the full EPF balance to the National Pension System (NPS) under Section 80CCD is considered as an exempt transfer.
The testing of the new EPFO system has been completed, the government confirmed. Union Labour Minister Mansukh Mandaviya stated that an announcement about the system's rollout will be made soon. Subscribers will be able to utilise these services only once the launch date and operational guidelines have been announced by the EPFO.
The government also announced an 8.25% interest rate on employees' provident fund deposits for 2025-26. The interest is likely to be credited this month to over seven crore contributing members, a source said.
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