EPF withdrawals will be less taxing now. All about the big budget announcement

Withdrawals from an EPF account before the completion of five years will now be less taxing.

Finance Minister Nirmala Sitharaman, in the Union Budget, has proposed a decrease in TDS (tax deducted at source) rate on withdrawals from EPF accounts not seeded with PAN.

Withdrawals from an EPF account before the completion of five years will be taxed at 20% instead of the current 30% if the users' PAN card is not seeded with the EPF account, according to Budget 2023.


Withdrawals from an EPF account before the completion of five years are currently taxable.TDS is not applicable if the withdrawal amount is less than Rs 50,000. However, TDS will be imposed at the maximum rate of 30 per cent for withdrawals exceeding Rs 50,000 if you haven't seeded your PAN with EPF account.

For those who have linked their PAN with EPF, the withdrawals are added to their taxable income, if withdrawn within five years of the EPF account opening.

"At present the TDS rate on withdrawal of taxable component from Employees’ Provident Fund Scheme in non-PAN cases is 30 per cent. It is proposed to reduce it to 20 per cent, as in other non-PAN cases," as per the documents of Budget 2023.

This means that if you are planning to withdraw funds from your EPF account, and in case you have not linked your PAN with your EPF account, it is advisable to wait until April 1, after which you will have to pay 20 per cent tax instead of 30 per cent.

Sitharaman also proposed in the budget to raise the tax exemption on leave encashment on retirement of non-government salaried employees to Rs 25 lakh from Rs 3 lakh.