Tax Consultant
934 Points
Posted on 18 June 2026
EPF interest taxation depends on the context:
CASE 1 - ACTIVE EMPLOYEE (still contributing):
For contributions above Rs. 2.5 lakh per year (Rs. 5 lakh if employer does not contribute), interest on the excess contribution is taxable as Income from Other Sources. This rule came into effect from FY 2021-22. EPFO maintains two separate PF accounts internally to track taxable and non-taxable components.
CASE 2 - POST-SEPARATION (no more contributions):
Interest is tax-free for 3 years after the date of separation. From the 4th year onwards, the interest credited to the account is taxable as Income from Other Sources.
WHICH HEAD OF INCOME:
Taxable EPF interest is Income from Other Sources (not salary, unless your employer is including it in Form 16 for the active-employee scenario).
TDS ON EPF INTEREST:
EPFO typically does not deduct TDS on EPF interest separately. TDS is deducted at 10% (section 192A) only when the full EPF amount is withdrawn before completing 5 years of service. If only interest becomes taxable due to post-separation idle period, you need to self-report it and pay advance tax if the amount is significant.
Report the taxable interest under Schedule OS in ITR-1 or ITR-2. No TDS certificate will be issued by EPFO for interest , you will need to calculate based on the EPF passbook.