Tax on EPF post separation, when there is no Employer Contribution, but the account is still active

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WayFarer

Self

25 Points Joined July 2017

I am no longer employed and have separated from my erstwhile employer since sometime. My EPF account is still in active status and the balance has not been withdrawn. I understand that the interest accrued is taxable once the Employer contribution stops.

Please advise where and how to show this accrued interest when submitting returns for AY 25-26 .

When the PF balance is actually withdrawn later , where and how is it to be reported in the portal ?

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8883 Points Joined December 2011

Reporting EPF Interest Income in Tax Returns As you've separated from your employer, your EPF account remains active with accrued interest.

Here's how to report this interest income in your tax returns for AY 25-26: Taxability of EPF Interest - Interest on EPF contributions above ₹2.5 lakh is taxable. -

If your contribution exceeds this threshold, the interest earned on the excess amount will be subject to tax.

Reporting EPF Interest Income -

*Income from Other Sources*: Report the taxable interest income under "Income from Other Sources" in your tax return. -

*Calculation*: Calculate the taxable interest based on the EPF contribution exceeding ₹2.5 lakh. TDS on EPF Interest - *Threshold Limit*: TDS is deductible if the interest accrued exceeds ₹5,000 in a financial year. -

*TDS Rate*: 10% if PAN is linked, 20% if not linked.³ Reporting EPF Withdrawal When you withdraw your PF balance later, report it in the portal as follows: -

*Non-Taxable Portion*: Withdrawals are first adjusted against the taxable account and then the non-taxable account. -

*Taxable Portion*: If you've withdrawn funds before five years of continuous service, TDS will be deducted at 10%. Filing Tax Returns -

*Form*: Use the relevant ITR form (e.g., ITR-1 or ITR-2) to report EPF interest income and withdrawals. -

*Documentation*: Ensure you have necessary documents, including EPF statements and TDS certificates.

WayFarer

Self

25 Points Joined July 2017

Thank you so much Sir for the prompt advice ! Have a query related to the statement "Calculation*: Calculate the taxable interest based on the EPF contribution exceeding ₹2.5 lakh"

Currently the account is "active" as balance is not withdrawn, it within the 3 year window and accruing interest. However there are no contributions from either the employer or the erstwhile employee (myself), only interest is being deposited . In this circumstance , will the full interest accrued in the FY be taxable ? Or should the interest amount exceeding 2.5L be the amout used for Tax calculation ?