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TDS ON PAYMENT FROM EMPLOYEES PROVIDENT FUND [SECTION 192A]

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Overview of Section 192A: TDS on Payment From Employees Provident Fund

SECTION 192A: TDS ON PAYMENT FROM EMPLOYEES PROVIDENT FUND

Tax Deducted at Source (TDS) is a measure, in which person who are making payment of income are responsible to deduct tax from such income (at specified rates) and pay only net amount.

Tax so deducted (called TDS) shall be deposited with the Government’s treasury within the stipulated time.

The payer will issue a certificate in Form 16 or 16A to the payee and the payee will get credit for TDS and his tax liability shall be reduced to that extent.

In nutshell, the provisions are merely a mode of collection of income tax and a check on tax evasion through proper control and information.

Section 192A provides for deduction of tax on premature taxable withdrawal from employees provident fund scheme.

Section 192A: TDS on Payment From Employees Provident Fund

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.

When tax shall be deducted

The tax shall be deducted at the time of making of payment of accumulated balance due to the employee.

Deduction on which amount

Tax is deducted on the accumulated balance due to an employee participating in a recognised 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 recognised provident fund shall be exempted:

  1. if he has rendered continuous service with his employer for a period of 5 years or more; or
  2. 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
  3. 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 recognised provident fund maintained by such other employer.

Rate of TDS

  • 10%
  • 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.

Non-applicability of TDS under section 192A

TDS is not applicable when amount of such payment or aggregate amount of such payment to the payee is less than Rs. 50,000/-.

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

Quick Summary of Section 192A

Nature of payment Premature withdrawal from Employee Provident Fund
Threshold Limit for deduction of tax at Source Payment or aggregate payment ≥ Rs. 50,000
Payer Trustees of the EPF Scheme or any authorised person under the Scheme
Payee Individual (Employee)
Rate of TDS 10% [In case of failure to furnish PAN, TDS@ Maximum Marginal Rate]
Time of deduction At the time of payment

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