Hello friends, your little information can save your PF TDS to a great extent. So, in today's article, we are going to cover all the details of PF TDS. We will raise some common questions regarding this and third and most importantly I am sharing some legal ways by which you can save your TDS.
When is TDS deducted and how much is deducted?
Some other even if we go for PF withdrawal then we have to go through the 3 option Form 31, details, first we have to understand the whole process that when and how much TDS is deducted on PF. Hence JForm 19 and Form 10C are found.
Form 31 is for withdrawal of advance of PF, Form 19 is for part of PF and Form 10C is for withdrawal of pension.
Now note, if you are withdrawing your money through Form 31 or Form 10C, whether it is advance or pension, no TDS will be deducted on it. Hence TDS is deducted only under Form 19 and not in any other.
Now suppose you are making withdrawal under Form 19, and your service period is more than 5 years, in that case, no TDS will be deducted, if it is less than 5 years then there is only chance of deduction. Then you have to see if your total PF withdrawal i.e. your share 12% + employer's share is 3.67% this is 15.67% share which is shown in first two column of your passbook, if at the time of withdrawal is above 50 thousand then only your TDS will be deducted, otherwise not.
Hence, most of the people here have already excluded themselves from the TDS norm. If your amount is more than 50 thousand, then things come in your PAN card whether it is linked or not.
Suppose your PAN card is not linked, or not verified then your TDS will be deducted at the rate of 35% which is the highest marginal rate. But if your PAN is linked, there can be many options. If your PAN is linked and your total PF is < 2.5 lakhs then you should submit Form 15G or Form 15H, you will get option to submit Form 15G or 15H after uploading it if your
No TDS will be deducted if the amount is < 2.5 lakhs or if the amount is more than 2.5 lakhs then only 10% will be deducted. Or if you do not submit 15G or 15H, 10% will be deducted only when your PAN is verified. So here we have understood the process, let's take a quick few questions.
Is TDS deduction mandatory if the service period is less than 5 years?
The answer is "no". The Income Tax circular as well as the PF circular stipulates certain conditions, TDS will not be deducted if termination is subject to these conditions. The first of them is 'due to illness'
If the employee is terminated due to illness, then no TDS will be deducted. No.2- No TDS will be deducted if the termination takes place due to contraction or relaxation of business. Third reason- TDS will not be deducted even if the reason for dismissal is beyond the control of the employee. For example, if the employee loses his job due to a natural calamity or a notice by the pollution board, no TDS will be deducted. But there is a big problem in this.
Even though these reasons are income tax and PF circular, but when the employer enters the exit date of his employee, these reasons are nowhere to be found in the exiting software, due to which they cannot be recorded and difficult to use. it happens. The third thing they need to save TDS is that suppose an employee has worked there for 4 years and after that if he joins another company without taking full and final withdrawal of his PF and joins new job for 2-3 years. Now after working year he tries to withdraw his money, and transfer his money from old job to new job then TDS will not be deducted in that transfer case.
One more important point, if your overall continuous service in multiple or even different companies exceeds 5 years without taking your full and final withdrawal, then no TDS will be deducted.
Why TDS is deducted even after more than 5 years of service?
So here the culprit is NCP days i.e. the days when you did not deposit the PF amount, it happens when you are absent. So when you are absent, it will be updated as NCP days under ECR of your PF. Let me explain this to you with an example.
Suppose Ram has worked for 5 years 3 months, his total continuous service is 5yr 3m. But out of that 180 are NCP days which is equal to 6 months, then their actual service becomes 4 years 9 months, in which case TDS will be deducted. So if your service period is close to the threshold of 5 years then you have to be careful about the calculation of NCP days.
So here the culprit is NCP days i.e. the days when you did not deposit the PF amount, it happens when you are absent. So when you are absent, it will be updated as NCP days under ECR of your PF. Let me explain this to you with an example.
Suppose Ram has worked for 5 years 3 months, his total continuous service is 5yr 3m. But out of that 180 are NCP days which is equal to 6 months, then their actual service becomes 4 years 9 months, in which case TDS will be deducted. So if your service period is close to the threshold of 5 years then you have to be careful about the calculation of NCP days.
This idea may sound good, but will not work, as the circular very clearly states that only continuous service will be counted. In fact PF software also looks at your service period only while computing your TDS. So if you keep your money in 4 years even after leaving the job for 5 or 5.5 years, TDS will be deducted on withdrawal.
What to do if TDS is deducted at the rate of 10%?
So first of all, do not panic suppose you have not filled 15G, even after filing 15G your TDS is deducted at 10%. If you are not in the range of income tax, then just file your ITR for this financial year and it will show you your return, as it gets updated in your Form 26AS and linked against your PAN and if you If you are not under the limit then you will get your refund there.
If we do not have PAN card and we want to withdraw amount more than 50 thousand (or)
What should we do if we have done our withdrawal without PAN and got 35% TDS deduction?
Remember, if your amount is more than 50 thousand then do not withdraw without PAN, otherwise you will have to face a lot of problems. But what if 35% of your tax has been deducted, what's next? Now since you have not submitted your PAN, 35% tax is deducted but PF department cannot submit it to income tax under one PAN as they do not know which PAN card it is related to, so once they So as soon as you come to know that your 35% TDS has been deducted, immediately go to the PF office with your PAN card and ask them to file the amended return once this money goes to the income tax department. If so, it will be very difficult to get it back as a refund.
What if your PAN has been submitted but not verified?
If your PAN has been submitted but not verified, it will be treated as if you have not submitted it. This is an important point as your amount is > 50K Now let us know some legal ways how can we save TDS on PF? The first thing to remember is that TDS is not equal to tax. Even though you manage to save TDS here, but if you are under the taxable limit then you have to pay income tax at the time of filing ITR. So saving TDS does not mean saving tax. So the first and most common way is Form 15HG/15H. If your amount is less than 2.5 lakhs then you can save your TDS by filling Form 15G or 15H. How to fill Form 15G/15H and upload it on PF website.
The second method is very unique. In this, if your PF amount is around 60-70 thousand, then make an advance withdrawal once before entering the exit date. Suppose you have made an advance withdrawal of 30K, now your net amount will be 40K which when you withdraw after 2 months, there is a 99% chance that your TDS will not be deducted, unless someone checks it very diligently Don't do it Otherwise no TDS is deducted on it in most of the cases and the third method which is already given in the circular,
Conclusion
But as I told you that it is a bit more difficult if you have lost your job due to those 3 reasons which are under the control of the employee, then, in that case, as soon as you opt for the withdrawal, you will be required to sign the job with the employer's signature. One can mention his correct exit reason in the application and submit it to the PF office along with his correct exit reason like illness. Or the closure of the company then in that case your TDS will not be deducted whether you have PAN or not. So friends if you are withdrawing a lot of money from PF then it is very important to save it properly nowadays due to inflation money loses its value during your stay in bank. So you should invest it at the right place.
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