Here Are New Income Tax Norms On PF Withdrawal

Finance Minister Arun Jaitley in the Budget announced measures to reduce the burden of TDS (tax deducted at source) for small tax payers.

"To improve the cash flow position of small taxpayers who get their funds blocked due to current TDS provision, I propose to rationalize TDS provisions for Income Tax," Mr Jaitley had said in the Budget speech.

Under TDS, the person or entity paying the income, deducts the tax and pays the balance to the person receiving the income. "The objective of the government is to reduce the grievances of the tax payers," says Sudhir Kaushik, co-founder of Taxspanner.com

Here are some of the revised TDS norms which will be effective from June 2016.

1) If a person withdraws from his or her employee's provident fund (EPF) account before five years, TDS will be deducted at the rate of 10 per cent if the amount withdrawn is more than Rs. 50,000 as against the earlier limit of Rs. 30,000. However, if a person fails to provide PAN (permanent account number) number, tax will be deducted at 30 per cent.

2) In case you have received payment from a life insurance policy on maturity or withdrawal, TDS will be deducted at 1 per cent instead of 2 per cent earlier. In Budget 2014, insurers were allowed to deduct a tax of 2 per cent if maturity proceeds of life insurance policy if the premium paid is more than 10 per cent of the sum assured. However, no TDS will be levied if the sum paid is less than Rs. 1 lakh in a financial year.

3) If you are earning a commission or brokerage, TDS will be deducted if the amount earned is more than Rs. 15,000 against earlier limit of Rs. 5,000. Also, rate of TDS has been reduced from 10 per cent to 5 per cent.

4) The new norms provide big relief to non-resident Indians who don't have PAN. "Non-residents without PAN are currently subjected to a higher rate of TDS. It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply," Mr Jaitley said in his Budget speech. The earlier provisions proved to be an impediment in terms of ease of business, says tax expert Amit Maheshwari.