Changes in Provident Fund Premature Withdrawal Tax in Budget 2015

Provident Fund premature withdrawal rules have been made little bit stringent in the Budget 2015. With an aim to secure post retirement life of employee, Union Finance Minister Arun Jaitely has proposed to levy tax on the premature withdrawal of Provident Fund at the rate of 10%.

Premature withdrawal means withdrawal before completing the continuous service of 5 years. While calculating this 5 years of continuous service, Service to the previous employer is to be included provided the Provident Fund balance is transferred from old PF account to new PF account. This means closing of old PF account and then opening of new PF account will be not be considered while calculating 5 years of continuous service.

Tax on Provident Fund withdrawal before 5 years proposed in Budget 2015:

1. TDS to be deducted by at the rate of 10% from the withdrawn amount.

2. TDS will not be deducted if the withdrawal is less than Rs.30,000.

3. Also, if the person gives declaration that he do not have any taxable income by filing Form 15G or Form 15 H, then also no Tax will be deducted.

4. In case the PAN is not provided to the Provident Fund authorities than tax will be imposed at the maximum marginal rate which means tax rate applicable to highest slab tax payers, around 35 percent.

5. Tax on Provident Fund withdrawal after 5 years of continuous service remains intact and no tax will be levied on the withdrawn amount.

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