The statutory body, EPFO has introduced fresh guidelines for taxation and deductions on the employees' retirement accounts. EPFO directs that tax deducted at source (TDS) will be implied on the date of the credit of interest on provident fund accounts if they are not in final settlement or transfers.
EPFO has announced a new tax structure on PF contributions above ₹2.5 lakh for private-sector employees, while the threshold limit is set at ₹5 lakh for government employees.
Meanwhile, on the above limit, TDS will be applicable in case of PF final settlement, transfer claims on transfer from exempted establishments to EPFO, and vice versa.
One of the key factors to take note of is the rate of TDS that will be paid by an employee. Not everyone will have to pay TDS though on their PF interests.
As per EPFO guidelines, TDS if amounted to ₹5,000 will have no deductions for Indian residents, however, the member’s individual tax Liability towards his total tax shall remain.
Further, the EPFO states that if a PF account is linked with a valid Permanent Account Number (PAN), the TDS rate will be 10%. However, if not linked with a valid PAN, then the TDS rate gets doubled to 20%.
In that case, if your PAN is not updated or not linked with your PF account, you simply pay double the TDS rate than a normal 10%.
Under section 206AA of the Income Tax Act, every taxpayer who receives taxable income needs to furnish their PAN to the payer (EPFO) of such income.
Notably, one can claim a TDS return by filing forms 26 Q and 27 Q of Income Tax. The due date for filing a TDS return is for the first quarter (April to June) by July 31st of the financial year; the due date is October 31 for the second quarter (July to September); while January 31 is the due date for the third quarter (October - December); and May 31st is set as the last date for filing TDS returns for the fourth quarter (January - March) of a financial year.
If TDS returns are not filed, EPFO states that a penalty of ₹200 is levied for every day during which the failure continues. However, the amount of fees will not exceed the amount of TDS. The dates for filing fees of the TDS statement are the same as the periods for filing TDS returns.
The new guidelines have come into effect from April 1, 2022.
Here's how you can link your PF account with PAN:
Firstly, it needs to be noted that your PF number is also referred to as UAN (Universal Account Number). You can use your Aadhaar number or PAN to know your UAN which will help you log in to your PF account to review your balance, passbook, filing, and other key details of your account.
To link your PF account with PAN, you need to follow a few simple steps.
Step 1: The first step is to visit your EPFO UAN Member e-Seva Portal and log in using your UAN number along with your password. A captcha code will be given below the password, you need to add the exact unique code in a box below it for successful login.
Step 2: Once logged in, click on the 'Manage' section available on the main menu.
Step 3: Under the 'Manage' section, click on KYC. You will be directed to a page with options to add your personal information such as bank account, PAN, Aadhaar, passport, driving license, election card, ration card, and national population register.
Step 4: You should select the PAN section, and add your unique PAN number. Ensure to enter your name as printed on the PAN card and click save.
Step 5: If your name and number match with the IT department records, then your PAN is verified automatically. Once your PAN is successfully linked with your PF account, you will find the PAN information in your 'Member Profile' table.
The new TDS structure applies to the above-mentioned threshold limit for government and private sector employees on their contributions for the previous year 2021-22 and subsequent previous years. Also, TDS will be applicable in case of death as it is for a live member. Further, TDS is the same for international workers as it is for Indian workers.
Latest provisional data of Ministry of Labour & Employment that was released last month, shows that EPFO has added 15.29 lakh net subscribers during January 2022. From the total, approximately 6.65 lakh net subscribers exited but re-joined EPFO by continuing their membership with EPFO instead of opting for final withdrawal. The payroll data also reflects a declining trend in the number of members exited since July, 2021.
