How is PF withdrawal taxed in US tax filing? | Mint
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Business News/ Money / Personal Finance/  How is PF withdrawal taxed in US tax filing?
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How is PF withdrawal taxed in US tax filing?

If you withdraw from Employees’ Provident Fund (EPF) before completing five years of continuous service, tax deducted at source (TDS) will be deducted

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I have worked for more than five years in India. Now, I have moved to the US on L1 Visa. 

I want to know if I can I withdraw my Provident Fund (PF) corpus without any tax or penalty in India? Also, when I will file taxes in the US now, will I need to show the PF amount as an income and pay tax on that? If yes, would that tax be on the interest earned only or the principal too? 

  -Name withheld on request

 

If you withdraw from Employees’ Provident Fund (EPF) before completing five years of continuous service, tax deducted at source (TDS) will be deducted. In calculating five years of service, your tenure with the previous employer is also included. 

If you transfer your EPF balance from the old employer to a new employer and your total employment is five years or more, no TDS is deducted. Do remember that you must calculate the exact five years, there is no grace if you are short by a few days. 

TDS is deducted at the rate of 10% on EPF balance if withdrawn before five years of service. Remember to mention your PAN at the time of withdrawal. If PAN is not provided TDS shall be deducted at the highest slab rate of 30%. 

After Budget 2021, interest on an employee’s contribution to an EPF account above 2.5 lakh during the financial year is taxable in the hands of the employee. This interest is also subject to TDS. 

 This amount may not be taxable in the USA which will further depend upon your residential status and the double taxation avoidance agreement (DTAA) between these two countries with respect to retirals. 

It is recommended that you consult an expert to understand how you will be impacted. 

 Archit Gupta is founder and chief executive officer, Clear.in.

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Published: 31 Oct 2022, 09:42 PM IST
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