Section 192A of the Income Tax Act, 1961 essentially is concerned with the Tax Deducted at Source or TDS on the withdrawals of the provident fund. This section is particularly new as it has just been introduced in the Income Tax Act.
The section 192A of the Indian Income Tax Act deals with tax deducted at source on PF withdrawals. This is a new section recently in the existing Income Tax Act recently by the government of India as per the recommendations made in the Finance Act 2015. This new provision has come into effect from 01.06.2015. The section 192A comes right after the section 192 of the Indian Income-tax Act, 1961.
Deduction of TDS on Withdrawal from PF
As per the provisions included in this new section, TDS will be deducted at source if the accumulated balance at the time of withdrawal is more than Rs. 30000 and the PF account holder has served less than five years in an organization.
TDS will be deducted as per the following rates:
- TDS will be deducted at 10%, provided PAN is submitted. However, if the provident fund holder furnishes Form No. 15G or 15H, then no tax will be deducted at source.
- If a person fails to submit PAN or Form No 15G or 15H, then tax will be deducted at source at the maximum marginal rate.
Tax will be deducted at source on PF balance at the time of payment of the PF amount to the employee.
TDS deduction on PF withdrawal will be applicable in the following circumstances:
- When a PF holder transfer his/her PF balance from one account to another PF account. It usually happen when a persona changes companies.
- When a person gets terminated from service because of various reasons such as ill health or any other reason, discontinuation of business by employer, completion of project etc.
- When a provident fund holder withdraws PF after a period of five years of nonstop service along with discontinuing service with the previous employer.
- It also applies to the following circumstance when your PF withdrawal amount is less than Rs. 30,000 and you have served in an organization for less than 5 years.
Section 192A of Income Tax Act
This is a new section included in the Indian Income Tax Act as per the Finance Act 2015. This section is all about deducting tax at source on accumulated PF withdrawal. TDS will be applicable only then when your total provident fund withdrawal will be more than Rs. 30,000. In case, it is less than Rs. 30,000, there will be no tax deducted at source. Under this provision, any person is entitled to receive any amount on which tax is deductible, provided the person furnishes his/her Pan number to the person responsible for deducting tax. If the PF account holder fails to do so during withdrawal, tax will be deducted at rate.
Rate of TDS on PF Withdrawal
As per the Indian Income Tax Act, 1961, tax will be deducted at source at 10%. This rate will be applicable only after the submission of PAN card. If a PF account holder submits Form 15G or 15H, then no tax will be deducted at source.
When PAN submission is not Required?
Submission of PAN (Permanent Account Number) is not mandatory when a PF account holder has served in an organization for more than 5 years. In this case, he/she does not have to submit Form 15G and 15H as well. Besides, PF account holders whose employments have been terminated due to by ill- health or any other reasons such as discontinuance of business or project completion, they are also not required to submit PAN. For them, no tax will be deducted at source.