10(12) of income tax

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This discussion clarifies the tax exemption for EPF and GPF interest under Section 10(12) of the Income Tax Act. Generally, interest earned on your EPF balance is tax-exempt if your continuous service exceeds five years. However, a key point is that interest on employee contributions exceeding £2.5 lakh in a financial year is now taxable. If your total EPF interest for the year is below this threshold, no specific exemption claim is needed in your tax return as it's automatically not taxed.

sachin Alwadhi

sachin Alwadhi (Querist)

13 June 2025 Kindly suggest can we claim exemption of epf interest and gpf interest in 10(12) accumulated on epf balance if employee service more than 5 year continuously and balance is greater than 10 lacs in Ay 2025-26 ????

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

14 June 2025 Yes, you can claim exemption under section 10(12).

sachin Alwadhi

sachin Alwadhi (Querist)

19 June 2025 Thanks sir .one more question what are terms and conditions to avail this exemption? Secondly we have deposited 150000 in epf as employee contribution and 25600 by employer contribution during fy 2024-25 and we have received 70800 as interest due to accumulated balance in epfo.For 150000 we have claimed 80 c and my question is can we claim exemption of epf interest of Rs 70800 in 10(12) or not ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

19 June 2025 No need to claim any exemption on interest under section 10(12) in ITR.

sachin Alwadhi

sachin Alwadhi (Querist)

19 June 2025 Then under which cases we can claim exemption u/s 10(12)?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

19 June 2025 No need to show such income in ITR and claim exemption.

sachin Alwadhi

sachin Alwadhi (Querist)

20 June 2025 Means we cant take exemption of epf interest u/s 10(12) if interest is less than 250000 during financial year but if Interest is greater than 250000 during financial year then need to add interest in taxable income.kindly clear confusion

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

21 June 2025 Yes, you are right...
...
Interest on an employee's contribution to an EPF account above Rs 2.5 lakh in a financial year is taxable.

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