How is TDS deducted on Accumulated Balance Due to an Employee?

CA.R.S.KALRA | Last updated: 05 January 2021

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Section 192A of the Income Tax Act outlines the Tax Deducted at Source (TDS) applicable to the accumulated balance paid to an employee from a recognised provident fund. This tax is deducted by the provident fund trustees at a rate of 10% on the portion of the balance includible in the employee's total income, provided the payment exceeds ₹50,000. Specific conditions apply, particularly concerning employees with less than five years of continuous service, though exceptions exist for reasons like ill health or business cessation.

192A. Notwithstanding anything contained in this Act, the trustees of the Employees Provident Fund Scheme, 1952, framed under section 5 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or any person authorised under the scheme to make payment of accumulated balanc

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FAQ :

The trustees of the Employees' Provident Fund Scheme, 1952, or any person authorised by the scheme to disburse accumulated balances to employees, are responsible for deducting TDS.

Tax is deducted at the time of making the payment of the accumulated balance to the employee.

TDS is not deducted if the aggregate amount of the taxable component of the lump sum payment is less than ₹50,000.

The standard TDS rate is 10% of the taxable component of the lump sum payment. However, if the employee fails to provide their PAN, tax will be deducted at the maximum marginal rate.

TDS is not required if the employee has completed five years of continuous service (unless terminated due to specific reasons like ill health) or if the recipient furnishes Form 15G/15H.

TDS is applicable to the employer's contribution, interest on the employer's contribution, and interest on the employee's contribution if these are taxable in the employee's hands and the conditions of Section 192A are met.