The beginning of a new fiscal year allows us to execute different financial activities, and members of the Employees Provident Fund Organisation (EPFO) have been required to link their PAN with their EPF account in order to fulfill KYC compliance. Non-linking of PAN with PF account can result in a variety of complications, the most notable of which is that one would have to pay higher TDS o
The beginning of a new fiscal year allows us to execute different financial activities, and members of the Employees' Provident Fund Organisation (EPFO) have been required to link their PAN with their EPF account in order to fulfill KYC compliance. Non-linking of PAN with a PF account can result in a variety of complications, the most notable of which is that one would have to pay a higher TDS of 20% if his or her PF account is not linked with PAN.
TDS deducted for the month of March must be deposited by the 30th of April of the next fiscal year, or by the 7th of the following month for other months. However, TDS of 10% will only be applicable if an EPF member has linked his or her account with PAN and failing to do the same will result in the following circumstances.
In a circular dated 5th April 2022, EPFO has said that "If PF account linked with a valid PAN, rate of TDS shall be 10 per cent and if the same is not linked with a valid PAN, rate of TDS will be double the rate of normal TDS."
The circular also states that "The rate of TDS shall be same in death case also i.e. if the member account of resident is linked with a valid PAN, the rate of TDS will be 10 per cent and if the account is not linked with a valid PAN, the rate of TDS will be double the normal rate. However, interest u/s 60 will not be payable if the account becomes inoperative u/s 72(6), as per same interest is payable for 36 months from date of death or upto previous month when claim is settled u/p 70, whichever is earlier."
EPFO has also clarified in the circular that "If the member has not linked the account with PAN, rate of TDS u/s 194A will be double than the normal rate of TDS i.e. 20 per cent at the time of annual interest accounting as well in case of PF account settlement/transfer as per provision of section 206AA of the IT Act."
According to EPFO, every individual entitled to receive any amount on which tax is deductible must provide his or her Permanent Account Number (PAN) to the person in charge of deducting such tax, failing which tax will be deducted at the higher rate, which is as follows:
(i) at the rate specified in the relevant provision of 206AA of the IT Act; or
(ii) at the rate or rates in force; or
(iii) at the rate of twenty per cent: (Ref. section 194 A read with section 206 AA of Income Tax Act)
According to EPFO as per section 206AA of IT Act, every taxpayer who receives taxable income needs to furnish their PAN to the payer (EPFO) of such income and Rs.200 for every day during which the failure continues. The amount of late fees however shall not exceed the amount of TDS is the penalty for not filing a TDS return.
To avoid the higher TDS as discussed above, all resident EPF members are mandated to link their PAN with their EPF account, and for the same, the process has been briefed below.