TDS on Interest paid on accumulated balance at the time of PF withdrawal

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This query is : Resolved

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This discussion clarifies the taxability of interest earned on Provident Fund (PF) balances when an employee withdraws their PF after leaving a company. While PF received after 15 years of service is generally tax-exempt, interest accrued on the balance *after* retirement or resignation and before withdrawal is considered taxable. The employer is liable to deduct TDS on this interest, and the former employee may be liable to pay tax on it.

CM (Querist)

19 March 2023 Hello,

I have read an article in this forum, that TDS is not deductible on Interest paid on accumulated balances, both Employee and Employer contribution, at the time of PF withdrawal.

I need advice for the below situation.

An employee has left the company, an MNC in India and after 4 years, applied for PF withdrawal in current FY. The employee is not working since then. The PF account is more than 15 years old.

The company deducts TDS at 30% on Interest paid on employer contribution and 10% on Employee contribution accumulated balances for the period of 4 years ie the period after the employee has resigned till the PF withdrawal.

Is the company liable to deduct TDS? And Is the former employee liable to pay tax on the interest amount?

Thanks
Tina

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

19 March 2023 Yes, company is liable to deduct TDS on interest earned on EPF after retirement, as it is taxable.
If you keep your EPF investment intact till retirement, what you get on retirement is completely exempt from tax.
But if you delay withdrawing your EPF corpus, any interest earned on the EPF balance post-retirement is taxable.

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CM (Querist)

19 March 2023 Thanks for the reply.
I want to clarify further, if the employee is not working for few years, then the employee can let the PF account balance, be with the past employer till the employee starts working again with another company? In this case the past employer was sending reminders to transfer the PF balance.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

19 March 2023 Yes, he can transfer the balance of PF account to new employer.
He may reply to ex-employer about his current employment status.
But till he is unemployed his accrued interest in PF account is taxable.