ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What Are Tax Liabilities on Premature Withdrawal of Pf?

Updated on April 26, 2020
PrateekJain24 profile image

I had a habit of setting goals, but I was ignoring the most crucial thing. Making small efforts towards progress ultimate result in success.

What is a Provident Fund?

Provident fund plans benefits will be enjoyed by the salaried employees after their retirement. This is also known as Pension fund. This fund collects 12% of salary every month into the Employees' Provident Fund account.

The purpose of such a retirement benefit plan is to gather a significant amount of money. This money is for the employees to meet their post-retirement needs. There is a streamlined notice issued by EPF council. As per the notice, 75% of the pension fund can be withdrawn by employees after one month of unemployment. But the last 25% is transferable after his new employment in the new employer custody.

Types of PF Withdrawal

There are majorly two withdrawal norms.

  1. Final recompense of PF.
  2. Partial recompense of PF.

Employees who wish to exercise any of the above options can raise a request on their EPFO portal. The request should support an application approved by the employer. Withdrawal can be done easily if employees have linked their Aadhaar details with UAN. EPFO does not favour treating PF money as a bank account deposit. The social security benefits under the provident fund scheme can only be driven on specific conditions. Such a condition is a constant contribution towards provident fund by the employer.

Tax Implications on PF Withdrawal

Tax liability arises on the amount that is withdrawn before completion of steady service of 5 years. But any amount withdrawn after completion of continuous service of 5 years is tax-free. Tax implications may differ when an employee gets jobless due to an unsure event such as injury or accident. In such a situation, PF withdrawal by them will not be taxable.

Tax implication will change for employees withdrawing Pension funds before five years of continuous service. Now the amount of principal and interest both will be taxable in the current financial year. Tax rates are divided into two categories. Depending upon employees who have submitted or not, their PAN details to UAN authorities. Flat 10% tax rate is applicable to the amount accrued till date for employees furnishing necessary details. On the other hand, a flat 30% TDS rate is applicable to those employees who haven't submitted their details.

Investment in a National Pension Scheme from PF account is advisable in case of PF withdrawal. Subsequently, withdrawing funds from NPS is tax-free in the hands of employees. This is an effective way to save tax on PF withdrawal.

The continuous phase of service can be deemed when employees switch between the organizations. Therefore, the PF account of the old employer is transferred to a new employer. This will not count as a pause in the employee's service cycle.

Exceptional Cases For Early PF Withdrawal.

Employees can withdraw funds from their EPF accounts in a full or partial settlement. But the withdrawal before retirement is allowed only under the following situations.

  • On attaining the age of retirement.

  • If any EPF account holder has a home loan which they need to repay or foreclose.

  • In order to pay off medical bills.

  • On being jobless for a period of 60 days or 2 months as the case may be.

  • For repairs and alteration of the existing house.

  • To meet marriage or education cost.

Remedy In Case of Incorrect Exit Date.

Sometimes employees omit to enter or wrongly mention the exit date in their resignation documents. In such situations, they might face some adverse consequences of it. This may lead to a delay in their PF withdrawal. Hence to solve this issue here is an effective option. The Employee Provident Fund Organisation (EPFO) has come up with a facility in the form of a Unified Account Portal. Here employees can enter the date of exit from their previous employer. Earlier this facility of entering exit date is available only to employers. Now employees can also add their exit date by their own. By using Unified Account Number (UAN) and password one can easily add the exit date. So always cross verify the entered details. Click on 'Service History' under the 'View on top panel ' tab to verify. In order to avoid any unusual situation in future always do the recheck.


There are many retirement plans offered by employers to secure the future of employees. The Provident Fund is measured as the most reliable option among all. An EPF account which is lying dormant for more than 3 years still continues to earn interest on their funds. Moreover, contributory membership of 10 years in PF, ensures life-long pension to the members. Premature withdrawal is another helpful option of PF, and this should be used only in urgency. I hope this article helps both employers as well as employees. Be aware and understand properly the benefits and tax implications of provident funds.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Prateek Jain


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)