Section 192A of ITA, 1961 : Section 192A: Payment Of Accumulated Balance Due To An Employee

Explanation using Example

Imagine that Ravi has been working for a company for several years and has been contributing to the Employees' Provident Fund (EPF). He decides to withdraw his accumulated balance from the EPF, which amounts to ₹75,000. Since Ravi's withdrawal does not meet the conditions that exempt it from tax (such as continued service for five years or more), the amount is taxable.

The trustees of the EPF or the authorised personnel will check Ravi's total income to see if the EPF withdrawal is taxable. As the amount exceeds ₹50,000, they are required to deduct tax at the source (TDS) at the rate of 10% on the withdrawal amount. Therefore, they will deduct ₹7,500 as TDS and Ravi will receive the remaining ₹67,500.

However, if Ravi fails to provide his Permanent Account Number (PAN) to the trustees, they are required to deduct tax at the maximum marginal rate, which is higher than the standard 10%.