Provident Fund is a very good long term investment and saving tool with EEE(Exempt, Exempt, Exempt) benefit. It means that taxpayer is given exemption on Investment, Interest earned and maturity amount. However, it is important to note here that this EEE benefit is only available to those taxpayers who hold PF account older than five years. If you decide to withdraw PF amount before five years, PF Withdrawal will becomes taxable and TDS is liable to be deducted on same.
How to save tax on PF withdrawal
In case an individual is having annual income less than 2.5 Lakh then he can submit form 15G/H and can avoid TDS Deduction on PF Withdrawal amount, however same will be included in assesses total income in that particular financial year and if including PF amount his total income exceeds Rs. 2.5 Lakh than he have to pay Income tax as per the Income tax slab he falls in.
PF Department deducts TDS @10% (Reduced to 7.5% wef May 14, 2020) if amount is withdrawn before 5 Years.
However, if a taxpayer withdraws the amount after 5 years then the amount is exempt from tax.