As an NRI, the withdrawal of your PF amount before 5 years of continuous service is taxable in India. The tax treatment is as follows:
- Employee's PF contribution: Taxed as salary income at the applicable slab rate
- Interest on employee's contribution: Taxed as income from other sources at the applicable slab rate
- Employer's PF contribution + interest: Taxed as income from other sources at the applicable slab rate
At the time of withdrawal, 10.4% TDS will be deducted on the full amount. However, if your total income for the year will be below Rs 2.5 lakhs, you can submit Form 15G to avoid TDS.
You can claim tax benefits on your home loan as follows:
- Principal repayment - Deduction under section 80C, up to Rs 1.5 lakhs
- Interest payment - Deductible from income under Income from House Property, with limits
In summary, the full PF withdrawal is taxable for you as an NRI with less than 5 years of service. However, you can lower your tax liability by submitting Form 15G if income is low and claiming deductions on your home loan principal/interest payments.
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Shubham Goyal