The Employees' Provident Fund Organisation (EPFO) has introduced a series of reforms to make it easier to withdraw one's provident fund. Ideally designed as a retirement corpus, the move by EPFO ensures that members are able to have access to their savings during emergencies. Under the PF scheme, employees are required to contribute a portion of their salary into the fund every month. This contribution is matched by their employer, which accumulates and continues to earn interest.
Currently set at 8.25%, this interest can help in creating a meaningful corpus for the employees during their retirement years. But unseen circumstances can push employees to seek early access to their funds. As a result, EPFO allows partial withdrawal in cases such as job loss, home purchase or education expenses, etc.
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To make the process simpler, the EPFO has reduced 13 withdrawal categories to three broad groups: Essential Needs, Housing and Special Circumstances. The move is expected to make partial withdrawals faster and easier for members.
Even with the reforms, the tax rules remain unchanged. PF withdrawals are tax-free if the account has completed five years of continuous service. However, withdrawals made before five years may attract tax, and TDS is applicable in some cases if the amount exceeds Rs 50,000.
Here's When PF Is Taxable:
1. If the withdrawal is under Rs 50,000, no TDS is applicable.
2. If it exceeds Rs 50,000 and the employee has completed five years of continuous service, no TDS is applicable.
3. No TDS is applicable on PF withdrawals made within five years of service if the amount is transferred to another PF account. TDS is also not deducted if the withdrawal is due to termination of service because of ill health, closure of the establishment or any reason beyond the employee's control.
4. If the employee wants to withdraw Rs 50,000 or more within five years of service without a PAN card, 34.60% TDS is applicable.
5. If the employee wants to withdraw Rs 50,000 or more within five years of service with a PAN card, they can use Form 121 (earlier Form 15G/15H) to avoid TDS. Without submitting forms, the withdrawal will attract 10% TDS even with PAN submitted.
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Form 15G and Form 15H were self-declaration forms to avoid TDS on interest income. Under the newly introduced Income Tax Act of 2025, these two forms have been replaced by Form 121.
“The form acts as a preventive compliance tool, ensuring that taxpayers whose tax liability is nil are not subjected to unnecessary TDS, thereby avoiding subsequent refund claims and administrative burden,” the tax department explains.
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