Tds on interest of pf balance of ex-employee

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 August 2013 Hi,

I had changed jobs from one company to another company in May 2012 but didn't get around to transferring the PF balance till now. However, at the time of leaving that company I had given in writing to them that I would be transferring the PF balance to my new company and do not wish to withdraw the account. Few weeks back, while going through the Form 26AS for filling my ITR, I noticed that there was a tax credit done by the PF Trust of my previous company under Section 194A. The tax credit was of some Rs. 2000 on an amount of some Rs. 20000. I had immediately enquired with the company about this TDS deduction but since there's not much time left for filing of the IT return, I filed the return without declaring the Rs. 2000 under TDS nor the Rs.20000 amount under income.

After few days, I got a response from the company saying this: "Tax u/s 194A which is applicable to all those, whose interest earned on Provident Fund from the Date of Leaving (DOL) till Date of Settlement / Transfer, exceeds INR 5,000/- in a Financial Year. In your case the interest earned on your PF after your DOL was greater than INR 5,000 and hence tax @ 10% was deducted on this amount.".

Now my queries are:

1) Is the company's interpretation correct?
2) If the interpretation is correct, I guess I should file a revised ITR. In the revised ITR, should I declare the Rs. 20000 (for which the TDS of Rs.2000 was deducted) under the 'Income from other sources'?
3) If the interpretation is wrong, what should I do to recover the TDS?

Would be grateful for any help.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

24 August 2013 Can someone give their opinion please?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Great question! Here's the breakdown about **TDS on interest on PF balance of ex-employee**:

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### 1) Is the company’s interpretation correct?

* **Yes**, their interpretation is broadly correct as per current Income Tax rules.
* After **employee leaves the company**, the **interest earned on PF balance** is taxable if the interest earned **exceeds ₹5,000 in a financial year**.
* The **EPFO or the previous employer’s PF Trust is required to deduct TDS @ 10% on such interest** under **Section 194A**.
* This TDS applies on **interest accrued post-employee leaving**, i.e., from Date of Leaving (DOL) till PF settlement or transfer.

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### 2) What should you do in the Revised ITR?

* Yes, you should **file a revised ITR** including:

* **Interest income (₹20,000)** under **‘Income from Other Sources’**.
* The **TDS amount (₹2,000)** will appear as tax deducted and can be claimed as a credit.
* This ensures your tax return is consistent with Form 26AS and avoids mismatch notices from the Income Tax Department.

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### 3) If their interpretation was wrong, how to recover TDS?

* Since the company’s view aligns with the tax law, this is unlikely.
* But if you think TDS was wrongly deducted:

* Request the company or PF Trust for **refund of TDS**.
* Or claim the excess TDS as a **refund while filing your income tax return**.
* Keep all correspondence and proofs handy.

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### Additional notes:

* TDS on PF interest is relatively new and applies only on interest after separation.
* If PF amount is transferred directly without withdrawal, no TDS applies.
* If interest is below ₹5,000, no TDS is deducted.

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If you want, I can help draft the revised return or assist with the calculation. Would you like that?

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