Early EPF Withdrawal: Is It Taxed?

Introduction

Many employees sometimes consider withdrawing their EPF savings before reaching age 55. One question that often arises: is the early withdrawal taxed?

This article explains the general principle of the tax treatment of early withdrawals and one verified exemption example. Note: this article is not a full interpretation — some details are still marked this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

General principle: early withdrawals are generally taxed

Withdrawals from a private retirement scheme before age 55 are generally taxed as employment income — unless exempted by an exemption order.

In other words, exemption is not automatic — it depends on the relevant exemption order.

Verified exemption example: PRS withdrawal before age 55

There is one exemption verified from official sources: withdrawals from a private retirement scheme (PRS) before age 55 approved under the Capital Markets and Services Act 2007 are exempted from tax via P.U.(A) 153/2020 (TT 2020).

This is recorded in the Notes to the BE Form (exemption item 620, eBE2024).

We know of the existence of this exemption, but the full conditions such as amount limits and scope have not been confirmed directly from the text of the order.

PRS is not EPF

Do not confuse two different schemes:

• PRS — a private retirement scheme, under the Capital Markets and Services Act 2007.
• EPF — Employees Provident Fund, under the EPF Act 1991.

The verified exemption above is specific to PRS. The tax treatment of specific early EPF withdrawals (Accounts 2/3; housing/medical/education purposes) has not been confirmed at this review.

Difference from retirement gratuity and pension

Exemptions for retirement gratuity and pension (for example due to ill-health, age 55 or compulsory retirement, or after 10 years of service) are separate provisions from the early PRS withdrawal exemption. Do not mix them up.

How is it reported?

The tax impact of 2022+ legislative changes (flexible EPF withdrawals) on current orders is also not confirmed — this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Frequently Asked Questions (FAQ)

Q. Are all early EPF withdrawals exempted from tax? A. No. Exemption is not automatic. The general principle: withdrawals before age 55 are generally taxed as employment income, unless exempted by an exemption order.

Q. What is a verified exemption example? A. Withdrawals from a private retirement scheme (PRS) before age 55 approved under the Capital Markets and Services Act 2007 are exempted via P.U.(A) 153/2020 (TT 2020).

Q. Is PRS the same as EPF? A. No. PRS is a private retirement scheme (Capital Markets and Services Act 2007); EPF is under the EPF Act 1991. The verified exemption is specific to PRS.

Q. What about early EPF withdrawals for housing or medical purposes? A. The tax treatment of specific early EPF withdrawals has not been confirmed at this review — this item still awaits official confirmation from HASiL — check again with HASiL before deciding. Do not claim an exemption without an official source.

Q. Is the retirement gratuity/pension exemption the same? A. No — that is a separate provision (ill-health, age 55/compulsory retirement, 10 years of service).

Glossary

• EPF — Employees Provident Fund (Kumpulan Wang Simpanan Pekerja) (under the EPF Act 1991).
• PRS — private retirement scheme (under the Capital Markets and Services Act 2007).
• P.U.(A) — Order (Federal Gazette).
• TT — Tahun Taksiran (Year of Assessment).
• YA — Year of Assessment.
• BE Form — income tax return form for individuals without business income.