If the recipient of Employee provident Fund (EPF) withdrawal does not provide his PAN, TDS on the withdrawal will be ________, instead of the maximum marginal rate as per new budget of 2023.
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1 i.e. 20% .
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As per the Union Budget 2023, the TDS (Tax Deducted at Source) rate on EPF withdrawals without PAN has been reduced from the maximum marginal rate (about 30%) to 20%.
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This change provides relief to employees who may not have updated their PAN with the EPF account.
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Earlier, if PAN was not provided, the withdrawal was taxed at the highest slab rate, causing significant deductions.
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Now, even without PAN, only 20% TDS will be deducted, making the process less punitive.
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This amendment is particularly beneficial for low-income earners or informal sector workers, who often face documentation challenges.
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However, if the service period is less than 5 years and PAN is provided, then TDS is only 10%.
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The aim of this change is to increase compliance and ensure fairer taxation.