New PF withdrawal rule: PAN card holders must check in FY24 during income tax return (ITR) filing

New provident fund (PF) withdrawal rule: While presenting the Union Budget 2023, Finance Minister Nirmala Sitharaman proposed to decrease Tax Deduction at Source (TDS) from 30 per cent to 20 per cent for taxable component of the Employees' Provident Fund (EPF) Scheme for non-PAN cases. However, other income tax rule will remain same. As per the income tax rule, if a PF or EPF accountholder goes for its EPF withdrawal before completion of 5 years of account opening, then in that case, whole withdrawal amount would remain taxable and PF contribution above ₹2.5 lakh per annum would also remain taxable.

"At present the TDS rate on withdrawal of taxable component from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases," Nirmala Sitharaman had said while presenting the Union Budget in parliament.

Simplifying the new PF withdrawal rule for non-PAN cases, Mumbai-based tax expert Balwant Jain said, "PF withdrawal is taxable if the withdrawal takes place before five years of PF or EPF account opening. If the PF account is seeded with account holders PAN card, then there will be no TDS levied on the withdrawal amount. PF withdrawal amount will get added to the total taxable income of the PF account holder in the year of withdrawal and the tax will become applicable on the basis of income tax slab getting applicable on the PF account holder."

However, Balwant Jain said that in case of PF account not seeded with account holders' PAN card, TDS is deducted from the net amount available in one's PF account. This TDS rate is currently 30 per cent of the PF withdrawal amount, which will come down to 20 per cent from 1st April 2023 or from the beginning of FY24.