TDS on Payment from Employees Provident Fund [Sec. 192A] – TDS Rate, Exemptions

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TDS on Payment from Employees Provident Fund: Section 192A provides for deduction of tax @10% on premature taxable withdrawal from employees provident fund scheme. Accordingly, in a case where the accumulated balance due to an employee participating in a recognized provident fund is includible in his total income owing to the provisions of Rule 8 of Part A of the Fourth Schedule not being applicable, the trustees of the Employees Provident Fund Scheme, 1952 or any person authorized under the scheme to make payment of the accumulated balance due to employees are required to deduct income-tax @10%

Also Read: TDS On Salary – Sec. 192 | When To Deduct, Rate Of TDS, Exempted Limit

TDS on Payment from Employees Provident Fund [Sec. 192A]

Withdrawal of the accumulated balance lying in a Recognised Provident Fund (RPF) account, is exempt from tax if the employee renders continuous service with the employer for a period of five years or more. In case of cessation of employment, if the employee takes up employment with another employer and the accumulated balance in her/his RPF account is transferred to her/his RPF account maintained by such other employer, then also the exemption is available.

TDS on Payment from Employees Provident Fund [Sec. 192A] - TDS Rate, Exemptions

Who is responsible to deduct tax

The trustees of the Employees’ Provident Fund Scheme, 1952, framed u/s 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or any person authorised under the scheme to make payment of accumulated balance due to employees.

Time of tax deduction at source [sec 192A]

Tax should be deducted at the time of payment of accumulated balance due to the employee.

Tax is deducted on

The accumulated balance due to an employee participating in a recognized provident fund includible in his total income owing to the not applicability of the provisions of rule 8 of Part A of the Fourth Schedule.

Rule 8 of Part A of the Fourth Schedule provides the accumulated balance due and becoming payable to an employee participating in a recognized provident fund shall be exempted:

  • if he has rendered continuous service with his employer for a period of 5 years or more; or
  • if, though he has not rendered such continuous service, the service has been terminated by reason of the employee’s ill-health, or by the contraction or discontinuance of the employer’s business or other cause beyond the control of the employee; or
  • if, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognized provident fund maintained by such other employer.

Applicability

If the accumulated balance paid to the assessee is exempt then tax is not required to be deducted.

In case the above-mentioned conditions are not satisfied, the accumulated balance due to the employee is taxable in the hands of the employee. In such a case, tax is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made, by treating the same as a contribution to the unrecognized provident fund.

Rate of TDS: 10%

TDS on Payment from Employees Provident Fund under Sec 192A is 10%.

The trustees of an RPF are required to deduct tax at source on such accumulated balance at the time it is paid, as if such withdrawn amount were income chargeable under the head Salaries. However, often, the trustees did not have the requisite information to be in a position to compute the TDS correctly. With a view to simplify the process of deduction in such cases, Section 192A provides that trustees of RPFs shall, at the time of payment of the accumulated balance due to the employee, deduct tax at source at the rate of 10%, where the aggregate withdrawal is Rs. 50,000/- or more.

in case of non-submission of PAN

Any person entitled to receive any amount on which tax is deductible shall furnish his Permanent Account Number (PAN) to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.

At the same time, if the concerned employee fails to furnish her/his permanent account number (PAN) to the person responsible for deducting such tax, then tax shall be deducted at the rate of 20% as per Section 206AA. It has also been provided that tax shall not be deducted if the employee furnishes to the payer a self-declaration in the prescribed Form No. 15G/15H, declaring that the tax on her/his estimated total income of the relevant previous year would be nil.

When TDS is not applicable

Aggregate amount of such payment to the payee is less than ₹50,000