What is the tax on EPF withdrawal on early retirement?

I was forced to retire about two years back at the age of 55. If I withdraw the entire amount from EPF, would it attract tax? - Anonymous

The EPF scheme specifies the conditions under which withdrawal is permitted, and one of them is retirement. Withdrawal of the full amount standing to the credit of a member is permitted upon retirement from service - be it voluntary, forced or upon attaining retirement age.

However, withdrawal is permitted only if you have attained the age of 55 years before the payment is authorised. The entire amount standing on your credit at the time of retirement shall be tax-free upon retirement, provided you have completed continuous service for five years or more. Any interest earned on your accumulated balance post-retirement shall be taxable. TDS at the rate of 10 per cent is applicable for the taxable portion of withdrawal if it exceeds Rs 50,000.

Since your circumstance is that of retirement, the entire balance as on retirement will be tax-free upon withdrawal. However, the interest on the balance you have earned for the two years post-retirement shall be taxable as per slab rates applicable to you.

To reiterate, your accumulated balance contains two portions. First is the balance at the time of retirement, which would be payable to you without attracting any taxes. The second portion is the interest accumulated over the past two years that would attract tax and be taxable under income from other sources. Also, if the amount taxable exceeds Rs 50,000, then TDS will be deducted at the rate of 10 per cent upon withdrawal.

Suggested read: Is PF withdrawal taxable?