Section 192A of the Income Tax Act

A savings plan called the Employees Provident Fund was established to raise funds and create a retirement corpus. Even if it enables people to save money, Section 192A of the Income Tax Act taxes it. However, there are a few deductions that people can take advantage of to maximise their EPF benefits. People need to learn more about the provisions covered by this tax regime to make the process run smoothly. In this article, we will explain Section 192A of the Income Tax Act in detail.

---

Table of content

What is Section 192A of the Income Tax Act?

TDS Deduction on Withdrawal from Provident Fund

TDS Rate on PF Withdrawal Under Section 192A

Exemptions Under Section 192A of the Income Tax Act

Conclusion

Most Asked Questions

---

What is Section 192A of the Income Tax Act?

The TDS on early withdrawal from EPF is covered by Section 192A of the Income Tax Act. If an employee fails to comply with the requirements outlined in Rule 8, Part A of the Fourth Schedule, it instructs the Employees' Provident Fund Scheme, 1952 to deduct TDS. It is important to remember that the Finance Act of 2015 allowed for the addition of this clause to the Income Tax Act of 1961. This clause basically means that tax is subtracted at the time of payment. The government must receive TDS deposits from entrusted deductors within a week of the subsequent month that tax is withheld at source. On the other hand, the TDS that was withheld in March must be deposited by April 30th at the latest. The following table shows the due dates for quarterly filing.

TDS Deduction on Withdrawal from Provident Fund

According to the 192A TDS Section, if you withdraw more than Rs. 30,000 from your provident fund, the tax will be withheld at the source. This is particularly relevant if you've worked for your employer for fewer than five years. TDS will be withheld in the following situations when you take money from your provident fund: 

• When you switch jobs, you typically move your provident fund balance from one account to another.

• If your job terminates for reasons such as poor health, the conclusion of a project, or the closure of your employer's business.

• If you leave your position after working five years straight without taking a break from employment.

Therefore, when you get your provident fund payout, expect TDS to be deducted if any of these circumstances apply to you. According to Section 192A of the I-T Act, 1961, if the total amount withdrawn from an EPF account is ₹50,000 or less, no tax will be withheld at the source. Any sum over this cap will be subject to current regulations for taxation.

TDS Rate on PF Withdrawal Under Section 192A

According to Section 192A of the Income Tax Act of 1961, an employee must pay a 10% TDS if they prematurely withdraw their Employee Provident Fund. However, the tax will be withheld at the source at the highest marginal rate of 34.608% if the employee is unable to provide their PAN details. Another crucial thing to keep in mind is that, in accordance with section 192A's regulations, TDS will not be withheld from an employee's EPF withdrawal if they submit Forms 15G and 15H. Now, let's examine a few exemptions listed in Income Tax Act section 192A.

Exemptions Under Section 192A of the Income Tax Act

The following are some likely situations where TDS will not be withheld according to the guidelines in question: 

• When the entire amount is prematurely taken out of an EPF account is less than or equal to ₹50,000

• When a worker moves employment and the EPF balance is moved from one account to another 

• If an employee chooses to take their EPF funds out after working continuously for at least five years 

• When a worker submits Form 15H or Form 15G and their PAN card 

• If an employee's employment contract is ended because the project for which they were employed is finished 

• If the business endeavour was cancelled If the employee's illness resulted in the contract termination

Conclusion 

The Income Tax Act's Section 192A highlights the importance of early Employee Provident Fund (EPF) withdrawals. TDS has to be deducted at the rate of 10%, and at a higher rate if the PAN information is not given. On the other hand, modest withdrawals may be eligible for some deductions. A thorough understanding of section 192A's provisions can aid in efficient tax administration.

FAQ

Q1. Who is responsible for deducting tax u/s 192A?

The trustees of the Employee's Provident Fund Scheme, 1952, who may be the employer or any other person permitted by the scheme to pay the employee the accrued EPF amount, are required to deduct taxes from the employee's salary.

Q2. What is the deduction threshold under Section 192A?

The threshold exemption limit under Section 192A is ₹50,000.

Q3. Where can I show 192A income in ITR?

Section 80C allows for an income deduction for employee contributions. On the other hand, you must declare any withdrawals you make from your EPF account via the drop-down choice under "Section 10(12) Recognised Provident Fund." Additionally, you will only be able to withdraw money from your PF account tax-free after five years of employment.  

Q4. Which head of income is 192A?

The Tax Deducted at Source (TDS) on an early withdrawal from the Employees Provident Fund (EPF) is covered under Section 192A of the Indian Income Tax Act. This clause was added by the Income Tax Act in accordance with the 2015 Finance Act. A specific proportion of the withdrawal amount is used to pay the tax.

Q5. What is the taxability of premature PF withdrawal?

If PAN is presented, 10% of EPF withdrawals over ₹50,000 before five years of employment are subject to TDS (Tax Deducted at Source). If an unrecognised provident fund withdrawal is made without the Commissioner of Income Tax's approval, it will be subject to taxes.

Q6. When to deduct TDS under Section 192A?

If an employee chooses to take an early withdrawal from their EPF savings, TDS has to be withheld in accordance with Section 192A. However, the section also lists a few exceptions. These have been highlighted in detail in this comprehensive guide. 

Q7. Where do you have to show income generated from the EPF in your tax return?

You must disclose any withdrawals you make from your EPF account in accordance with Section 10(12). Remember that if you work for your present company for five years or longer, your PF income may be free from certain taxes. 

Q8. How much TDS do I have to pay if I withdraw Rs. 15,000 from my EPF balance of Rs. 20,000?

You will only be required to pay TDS if, at the time of withdrawal, your EPF account balance exceeds Rs. 30,000, as per Section 192A of the IT Act. The entire amount due in this instance is Rs. 20,000. TDS will therefore not be relevant.

Q9. What is the provision of TDS on EPF interest post-retirement?

After you retire, any interest you earn on your EPF account is subject to taxation. In these situations, the provisions of Section 194A will take effect. The non-existence of an employee-employer connection is the basis for the TDS deduction. 

Q10. How is the TDS rate decided if an employee fails to furnish their PAN?

Under Section 206AA, the Income Tax Department of India will deduct TDS at the higher of the following rates: 

• Any rate given in the applicable section of the Act 

• Any rate established in the Finance Act 

• At a base rate of 20% 

Q11. What is the difference between 192A and 192B?

Compensation to employees of the government who are not employed by the Union Government is outlined in Section 192A. Compensation for non-government employees is covered under Section 192B.

Q12. Is receipt of accumulated balance due to an employee section 192A taxable?

According to Section 192A of the I-T Act, 1961, if the total amount withdrawn from an EPF account is ₹50,000 or less, no tax will be withheld at the source. Any sum over this cap will be subject to current regulations for taxation.

Q13. What triggers the application of Section 192A for EPF withdrawals?

Section 192A applies when an individual withdraws their Employee Provident Fund (EPF) balance before the completion of five years of continuous service. TDS is deducted at the time of such premature withdrawal.

Q14. How is TDS calculated under Section 192A for EPF withdrawals?

Under Section 192A, TDS on EPF withdrawals is calculated at a rate of 10% if the PAN is provided. If PAN is not provided, TDS is deducted at the maximum marginal rate, which can be up to 40%.

Q15. Are there any exemptions available under Section 192A for EPF withdrawals?

Yes, exemptions under Section 192A include cases where the EPF balance is transferred to a new employer or the withdrawal is due to specific reasons such as medical emergencies or unemployment beyond two months. Such withdrawals may be exempt from TDS.

Q16. How can one avoid TDS under Section 192A when withdrawing EPF?

To avoid TDS under Section 192A, individuals must ensure they meet the conditions for exemption, such as transferring the EPF balance to a new account or claiming the balance after completing five years of continuous service.

Q17. What steps should be taken if TDS has been incorrectly applied under Section 192A?

If TDS is incorrectly applied under Section 192A, individuals should file a TDS refund claim with the Income Tax Department. They may also need to provide documentation and proof to rectify the issue and claim a refund.

Q18. Does Section 192A apply to EPF balances from both government and private sector employers?

Yes, Section 192A applies to EPF balances from both government and private sector employers. The TDS provisions are applicable regardless of the employer's sector if the EPF is withdrawn prematurely.

Q19. How does Section 192A affect the taxability of EPF withdrawals in the financial year of withdrawal?

Under Section 192A, EPF withdrawals are taxable in the financial year they are made. The TDS deducted is considered as advance tax and will be adjusted against the total tax liability for the year when filing the income tax return.