EPF interest taxable or not

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Interest accrued on your EPF account, even if you're no longer contributing, can be taxable. New rules state that interest on contributions exceeding £2.5 lakh annually is taxed. However, if your employer doesn't contribute, this limit increases to £5 lakh for your contributions. This change affects a small percentage of EPFO subscribers, with most continuing to receive tax-free interest.

bobby

bobby (Querist)
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23 June 2022 I was employed upto 2016 and then I am unemployed. I have an EPF account and as I am unemployed, there is no contribution by the employer neither by me to this account but on the balance amount, interest is accrued every year. Do I have to show it as income in the Income tax return for FY 2021-22 AY 2022-23? Is this accrued interest taxable every year? The limit of 2.5 lakhs contribution by employee does not apply to me in any case.

CA Puja Sharma

CA Puja Sharma (Expert)
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23 June 2022 Yes, the accrued interest on this EPF account will be taxable in your hands under the head other sources.
Further, if the interest amount is above the threshold limit then TDS will also be deducted on this interest u/ 194A.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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11 July 2022 1) According to the new rules, any interest credited to provident fund account of an employee shall be tax free only for contribution up to 2.50 lakh every year and any interest on employee's contribution over 2.50 lakh shall be taxed in the hands of the employee year after year. In case the employer does not contribute to the provident fund of the employee, then the threshold applicable will be ₹5 lakh of employee's contribution, says tax expert Balwant Jain.

2) The ₹5 lakh limit covers around 93% of the people who are EPFO subscribers and they will continue to get assured tax-free interest, according to the interest rate announced by EPFO every year.

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