Each and every investment you make has to go through three different stages i.e., i) Investment / Contribution stage, ii) Income Earning Stage & iii) Withdrawal or redemption stage. In each stage the investments/earnings can either be Taxed (T) or Exempted (E) from the taxes.
Same is the case with your contributions to EPF (Employees Provident Fund) Scheme. The deductions towards EPF (Employee share) are eligible for tax deduction under section 80c. This is in the investment phase. Your PF Deposit earns ‘interest income’. This is tax-exempt (subject to certain conditions). When you withdraw your EPF balance, the withdrawal is tax-free (subject to certain conditions).
So, it is a widely held belief that EPF falls under Exempt-Exempt-Exempt Category. Is this assumption totally true?
Are EPF interest income and withdrawals tax-free, irrespective of when you withdraw the funds? What if you remain unemployed, do not contribute to EPF for few years and then withdraw it? What would be the tax implications on such PF withdrawals? Is interest payable even if you do not contribute to EPF scheme? – Let’s discuss….
Is EPF Interest income Taxable or Tax-free? How are EPF Withdrawals taxed?
Below are the taxation rules applicable for EPF withdrawals & interest income earned on PF contributions, under different scenarios.
EPF Withdrawal before 5 years of Service:
- If you withdraw your EPF balance before completing 5 years of continuous service, it is considered as a taxable income.
- However, members whose service has been terminated due to his ill health, contraction or discontinuance of business of employer or other cause beyond the control of the member, no income tax (TDS) shall be deducted as per Rule 8 of Fourth Schedule to the Income Tax Act, 1961.
- if you withdraw your PF balance before the expiry of five years of continuous service, then it is taxable in the year in which withdrawal has happened. (Related article : ‘EPF withdrawals & TDS rules.’)
- In addition to this, your employer’s contributions along with the accumulated interest amount will be taxed as ‘profits in lieu of salary’.
- Interest accumulated on your (employee) contributions will be taxed under the head ‘Income from other sources‘. The tax deductions claimed on your contributions will be revoked or rolled back, and shall be liable to tax. (Read : ‘7 ways you could lose your Income Tax Benefits.‘)
- If you withdraw your EPF balance before completing 5 years of continuous service, it is considered as a taxable income.
EPF withdrawal anytime after 5 years of service, immediately after leaving the job:
- If you withdraw the EPF balance after completing 5 yrs of service, then EPF balance is not taxable. So, in this case, it falls under E-E-E tax category.
- The interest income is considered as an Exempt income under Section 10(12) of the IT Act.
- For calculating the period of 5 yrs of service, it is not necessary that service should be continued with the same employer. You may have worked in different organisations. But whenever you change the job, must get the PF balance in previous company transferred to new company PF Account. (Related Article : ‘EPF a/c auto-transfer Procedure.‘)
EPF withdrawal (after 5 years of service) after few years of non-contribution:
- The ITAT (Income-Tax Appellate Tribunal) in one of its recent orders has clarified that the EPF interest income is taxable, if PF member is not employed. ‘Any interest income accrued on EPF post retirement/resignation is taxable in your hands.’
- If you resign/retire/get terminated from your job, but do not withdraw your EPF immediately then interest income earned on your EPF balance is taxable during this non-contributory period. The interest income earned during your employment remains tax-exempted though.
- For example : Let’s say you have joined a company and started contributing to EPF Scheme at the age of 25 years. After remaining employed till the age of 40 years, you decide to quit and start your own business venture. However, you decide not to withdraw your EPF immediately (as EPFO pays interest income even if one does not contribute to EPF). At the age of 55, you decide to withdraw EPF. In this scenario, what are the tax implications on the accumulated EPF interest income and withdrawal of PF balance?
- The interest income accumulated during your employment period (from 25 years of your age till 40 years) is tax-free income.
- The interest income earned during the non-contributory period (i.e., from 40 years till 55 years) is a taxable income (though your total service period is more than 5 years).
- The interest accrued in each financial year during the non-contributory period should be declared in your Income Tax Return under the head ‘income from other sources’ and taxes (if any) have to be paid. So, interest income is taxable in the year in which it is accrued (on yearly basis).
- Kindly note that the EPFO pays interest income on all EPF accounts till an EPF member attains the age of 58 years. But, the interest accrued from the year of unemployment (due to resignation/termination/retirement) till you actually withdraw your EPF is a taxable income.
- On the other hand, if an employee retires after 55 years of age, then post three years from the date of retirement (i.e., after 58 years), his/her EPF account is treated as “inoperative” and does not earn any interest.
- In case, you are contributing to a Recognized PF maintained by a Private Trust of your Company (Exempted Organisation), any interest exceeding 9.5% shall be added to your (employee’s) Salary Income and is subject to income tax.
- Transfer of EPF & Tax implications : Income tax is not applicable on transfer of funds from one EPF account to another EPF account (or) on consolidation of multiple EPF accounts into one EPF account. (Read : ‘How to consolidate multiple EPF accounts?‘)
Latest update (01-Feb-2021) : Budget 2021 – No more tax free interest on more than Rs 2.5 lakh a year contribution towards EPF/VPF (only employee contribution).
- If employee contribution is more than Rs 2.5 lakh, the interest earned on the excess amount is taxable for contribution from 1st April 2021 onwards.
- Example – If employee share EPF + VPF is Rs 4.5 lakh in FY 2021-22. The interest earned on excess Rs 2 lakh (Rs 4.5 L – Rs 2.5 L) will now be taxable.
- Read : Interest on EPF Contributions above Rs 2.5 lakh is Taxable | Budget 2021
Hope you find this post informative and useful. In case, you have any query related to EPF account, kindly post it in the below ‘comment’ section.
Latest news (March 2021) : EPF interest rate for 2020-21. The Central Board recommends 8.50 % rate of interest to its subscribers for the year 2020-21. EPFO notifies 8.5% as interest Rate on EPF for the year 2020-21.
The previous FYs EPF interest rates are as below;
- FY 2019-20 : 8.50%
- FY 2018-19 : 8.65%
- FY 2017-18 : 8.55%
- FY 2016-17 : 8.65%
- FY 2015-16 : 8.80%
- FY 2014-15 : 8.75%
- FY 2013-14 : 8.75%
- FY 2012-13 : 8.50%
Continue reading : ‘How is interest on EPF account calculated?‘
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post published on : 12-December-2017)
Hi Sreekanth
I resigned from working with a company after 8 continuous years of service on 31st October 2020. After 2 months i.e. in Jan 2021 i applied for withdrawal of pf. I received the money in mid feb 2021. after i received the pf amount i applied for withdrawal of eps which i received yesterday after a deduction of around 10 %. The pf amount was received fully without any deduction while the eps amount was reduced by around 10 %. I read on the net that if we withdraw eps before 10 years, tds is applicable on the whole amount, which unfortunately i was not aware of. Though my eps becomes taxable, just wanted to reconfirm that there shall be no tax on pf withdrawal as service was for 8 years (more than 5 years). again reiterating that i received the pf amount in total without any deduction, no tax on pf becomes due just bcoz. eps withdrawal has become taxable.
Regards
Mahalakshmi
Dear Mahalakshmi,
Your understanding is correct (Claims are tax-exempt if service is 5 + years).
You may claim the TDS as refund (if any) while filing your ITR for AY 2021-22..
HI Sreekanth,
Found your blog so I have question regarding EPFO Interest in EPF passbook. I left my organisation in Sept 2019 (after 16 years of continuous service) and withdrew my entire EPF amount in Oct 2020.
When I checked my EPFO passbook today – there are 2 weird looking entries
1) Int. given against Claim 189 884 (Employee Share) and 166770 (Employer Share) (this entry is just after the entry for Feb 2020 showing 0 contribution for employer and employee)
2) Again there is another entry “Int. given against Claim : PUPUN200950097016 103928 (employee share) 91276 (employer share). this entry is just after Feb 2021 entry (which naturally shows 0 contribution for employer and employee).
Hence – when i file returns for FY 2020-21, do I need to show these entries in my income?
If so which of these 2 ‘interest against claim’ entries do I need to show as income (from other sources) ? Again – do I need to add up both employee share + employer share (from the ‘Int against claim entry) for tax purposes?
Dear sanjeev,
Even I am not sure on this, you may submit a grievance request to them via this link and ask for the required information..
Hi Srikanth,
i need information whether tax will be deducted 10% or 34% if pan is not approved by employer. currently unemployed, my employee share and employer share is 60k. aadhar and bank is verified.pan is verified in income tax return but epfo kyc details showing kyc under approval.if apply for full pf withdrawal, will be taxed or free?
Dear Megha,
You can follow it up with your employer and get the KYC approved!
Kindly go through this link – EPF Withdrawals : New Provisions & Rules related to TDS
Hi Sreekanth,
Thank you for the information. i need 1 more clarification that : can i delete pan details(kyc pending for approval – not approved by my employer more than 6 months) and update pan details from my account in EPFO account and try withdrawing full pf amount. Is it possible to withdraw pf without tax deduction.
Dear megha,
Yes, you can update your KYC details again.
Please note that if your service period is less than 5 years, your EPF claim amount is a taxable income (whether TDS gets deducted or not).
In case, your tax liability for the the concerned Financial year is nil and EPFO deducts TDS, you can claim it as Refund by filing your ITR.
Hi Sreekant,
Thank you for clarifying my doubts on above issue.
There was TDS deduction on on the Interest earned on Provident Fund
accumulations for FY 2019-20, Can I claim the TDS on this?
Dear Syed,
If eligible, yes you can claim..
I had retired on November 2017 . Pf amt withdraw on July-2020.In this case interest amt taxable or not.I have not shown in ITR PLEASE Me.
Dear Dinesh ji,
Kindly note that the interest earned during ‘non-contribution’ phase is a taxable income.
Related article :
* EPF Interest Income & Withdrawals | Tax Implications | Is EPF Interest taxable?
Hi, I have more than 5 years of experience in three different organizations. I have one UAN number and 3 pf accounts. Recently I transferred all my pf balance into the present employer account. But when I go to withdraw it is showing my date of joining epfo as Jul 2017 and end date as Nov 2019. So my service is less than 5 years. But actually I have transferred the balance for my entire 7 yrs into this account. Will I be considered as someone with more than 5 years of service or will TDS be deducted from my account.
Hi,
I have worked form last 7 years in one company then I left the job in FY 2014-15. In Year 2017, I have again joined the new company and transferred my previous PF into current PF account. Now I have resigned the job again and unemployed from last 6 months. So, Now Can I withdraw my PF amount and the amount withdrawal will be taxable or not?
Dear Deepak,
As you have consolidated your EPF accounts, your previous service period would also have got carried forwarded.
As your service period is more than 5 years, your claim amount will be tax-exempt.. If your service period is more than 10 years, you cant withdraw EPS balance.
Related articles :
* Online EPF Claim submission : Process Flow & Eligibility Conditions
* What happens to EPS on Transfer of EPF account (or) when you switch Jobs?
Thanks Sreekanth for your reply.
As I have withdraw my EPF amount last week but PF officer cuts the 10 % TDS on the withdrawal amount.
What should I do to get the same?
Dear Deepak,
Has your PAN been verified in UAN portal?
May I know the claim amount?
You can claim it when filing your Income Tax Return for the Assessment Year 2020-21.
Hi Sreekanth
My PAN and Aadhaar , both were verified. Ok, I will claim in Income tax return. Thanks
One more questions, I am planning to join job again next month, As I have completely withdrawal my PF (Employee & Employer) amount ,then for the next time, my previous service history will be calculated or not for tax exemption?
Dear Deepak,
Your previous service becomes NIL as you have withdrawn full EPF balance, it wont get carried forward.
Hi Sreekanth,
I have relived from one company currently, and the PF corpus is managed by teh company TRust, so tehy are calling me frequently to withdraw teh PF amount, which i’m reluctant as there is some ample amount and i want to earn inetrest which is taxable, how to handle this employer and what to do as its a Trust and not EPFO.
Dear Bina,
As per the EPFO guidelines, an EPF member of a PF Trust can also hold the funds in his/her EPF account till retirement age. The interest has to be credited.
But, the interest income accumulated during the non-contribution phase is taxable income.
Hi Sreekanth,
After 12+ years of service, I was laid of (forced resignation) 2 years back as part of company’s workforce trimming exercise. I did not withdraw my EPF balance then, thinking it’s my savings for retirement. Meanwhile, EPFO has credited interest for FY16-17 and FY17-18 in December 2018 with transaction date as 31-March-2018. For FY18-19 they are yet ot process interest). As per your article, I understand, this interest is taxable, since I am not contributing to EPF for last 2 years. My questions are;
(1) Do I need to pay tax now or at the time of withdrawal?
(2) If I have to pay tax now, Should I show the EPF interest earned for FY16/17 and FY17/18 in this year’s ITR (as the amount was actually credited in September 2018)? If not, now how should I handle this?
(3) Would the EPFO office deduct 10% TDS at the time of withdrawal when I do it in future? Note I have already provided PAN to them and its linked to my account.
(4) In case if EPFO account becomes Inoperative after 3 years of non-contributing period, do EPFO continue to pay interest?
Awaiting your response. Thank You.
Dear Jayant,
1 & 2 – You need to disclose the interest income received for FY 2017-18 during aug to dec 2018 in ITR AY 2019-20. For 2016-17, you should have disclosed interest income in ITR AY 2018-19.
3 – If PAN is seeded and digitally verified in EPFO unified member portal and also your service period is more than 5 years, EPFO may not deduct taxes.
Note that the interest amount accumulated till 2 years back is tax-exempt income on withdrawal.
4 – There is no concept of Dormant EPF accounts now.
Related articles :
* How to verify PAN online in EPF UAN Member portal?
* Interest on Inoperative EPF accounts | Will I get interest on my Dormant EPF account?
Thank you very much Sreekanth for prompt reply. In my case even for FY16/17, they had credited interest in Dec 2018; the delay was due to some processing issue from EPFO side. So shall I club together interest for both FY16/17 and FY17/18 together and show that in ITR?
Also under what head do I need to disclose this income in ITR?
Thanks again.
Dear Jayant,
I believe that you can club the payouts and disclose it under the head ‘income from other sources’.
You may kindly cross-check with a CA as well..
Hi Sreekanth, I understand that interest earned on EPF balance during non-contributing period is taxable, we must declare it in every year’s ITR and pay tax accordingly. However, EPFO never care to process interest before end of July (i.e. last date of filing ITR). Even this year also they have not processed interest for FY-18/19 yet. Last year they processed interest for FY-17/18 in November, when ITR was already filed and processed. So how can I show EPF interest in ITR? Shall I show interest earned for FY-17/18 in this year’s ITR? Is it right?
Dear Jay,
Yes, you can consider the Transaction date (date of credit).
For FY 2017-18, interest amount amount would have been paid in FY 2018-19 (AY 2019-20).
Related articles :
* AY 2019-20 Income Tax Return Filing | Which ITR Form should you file?
* Income Tax Deductions List FY 2018-19 | List of important Income Tax Exemptions for AY 2019-20
Thank you Sreekant for prompt response. But note that we may not know the exact transaction date since the EPFO passbook does not show the transaction date. In the first “Particulars” column it just have an entry as “Int. Updated up to 31/08/2018” (i.e. last date of last financial year), when the actual entry was posted, only EPFO officials knows; even their customer care is blank about it. I am sure they did in November, since I had checked the passbook in last October month and then there as no entry for it. So question is; is it right show interest earned in last Financial year (FY-17/18) in this year’s ITR (FY-18/19)?
Dear Jay,
EPFO generally pays the accrued interest of a particular FY on EPF accounts next FY only. So, I believe that you can disclose FY 2017-18 accrued interest but paid in FY 2018-19, in ITR of AY 2019-20.
Thank you very much Sreekanth. I appreciate your guidance.
sir mera pan card verifiy nae h..maine 1 saal services kre h..total amount+pension 26000 h..tds catega without pan card..tell me plzzz
Dear Sanjay,
If EPF claim amount is less than Rs 50k EPFO should not deduct TDS.
But, if PAN has not been seeded and verified in UAN portal, EPFO can deduct TDS.
i have contacted Sree Sir in Linkedin regarding my PF account, My Employer was not approving my DOB Change. He has suggested me and solved my problem.
Your the BEST OF ALL and Give the Positive thoughts, You have answer for everything.
Dear Sreekanth,
I have a work ex of 2 years and resigned one month ago to pursue my Masters abroad. I wish to withdraw the entire PF and Pension amount.
I have linked my Aadhaar and bank details on EPFO portal but unable to link my PAN(verification problem).
My PF(Employer+Employee) amount is approx 40k till date and 20k as Pension.
If I file claim form after 60days of my unemployment separately for PF and Pension, will it attract tax?
Many Thanks in advance.
Dear Mubeen,
Yes, it is a taxable income.
Dear Sir,
I was work in a company for 4 and half years and PF amount is 158000/- i have entered pan but not verified.How about the TDS deduction rate if 34+% can i claim the same?
I have feed the PAN details it is showing in the portal but not verified.
please suggest.
Dear DHEERENDRA,
As your service period is less than 5 years, whether TDS gets deducted or not, such withdrawal is a taxable income.
In case, they deduct 30% TDS and let’s say you are in 20% tax slab then you can claim the balance amount as Refund when you file your ITR.
I have an EPF account which has been inoperative since May 2016. In April 2019 it will be 3 years since the last deposit to the account. Can you advise if the interest earned on the account from May 2016 to April 2019 is taxable or the interest after completion of 3 years is taxable.
Dear Uttam,
Interest earned during 2016-19 is a taxable income.
Related article : Interest on Inoperative EPF accounts | Will I get interest on my Dormant EPF account?
Hi, I left my job after 4 years of continuous Service and now started my own company. I don’t intend to Withdraw my PF balance until retirement age. Does my EPF balance becomes taxable income this year?
Also what about the interest I earn on this balance? I think that would be taxable as normal interest income. Kindly let me know if my understanding is correct.
Dear Mukesh,
Interest income earned till the date of your Exit is not taxable.
Interest earned during non-contribution period is taxable in the respective Assessment years.
Hi Sreekanth,
I have completed 4 years of service. It is possible to partial withdrawal of EPF amount for purchasing Plot or Flat? and its taxable? and How much percentage of amount can i withdraw for the above purpose?
Kindly reply me to my mail. i appreciate your valuable time spending for me, thanks
Dear Gopi,
Kindly note that EPF partial withdrawals are not taxable.
Kindly go through this article : EPF partial withdrawal options and rules..
Hi Sreekanth,
I have completed almost 4.5 years of total service in India and moved abroad for a new job 1 year ago. I want to withdraw my PF and Pension amount. Will it be considered Taxable income?
Dear Rahul.. Yes, it is a taxable income.
I switched to a new company and I didn’t transfer the EPF and will do the same soon and have no intention of withdrawing it.
So, is the interest that I got till now from the old company is taxable?
Dear Hemanth ..If there is no non-contributory period in between then the accumulated interest on your EPF account(s) is not taxable.
Related article : What happens to EPS on Transfer of EPF account (or) when you switch Jobs?
Dear Mr. Sreekanth – I left my job in 2014 and have kept the EPF to earn interest. Is the entire interest on EPF post leaving the job taxable or the interest on the balance on date of leaving is exempt. What happens to the previous years prior to the new ruling? Is it taxable on accrual basis or on withdrawal only? Should we not take it up with Government to change this decision? Thanks.
Dear Mohan,
The interest on EPF balance post leaving the job taxable.
Kindly note that it is not a new ruling.
Ideally one has to show the taxable income on accrual basis in his/her ITR.
Hi Srikanth, In this case does EPFO takes care of TDS on the interest income, or the assessee needs to pay the tax and refer it in his ITR? Also where one have to report this interest in ITR-1? Is it under head “Income under other sources” by clubbing it with bank interest or somewhere else?
Hi Srikanth, I got the answer for my second question when I went thru QA section. Sorry, but I have one more question. Does interest earned on both Employee’s contribution as well as Employer’s contribution is taxable OR its just interest earned on Employee’s contribution? Thank you.
Dear Vai,
Your employer’s contributions along with the accumulated interest amount will also be taxed as ‘profits in lieu of salary’.
Thank you Srikanth, You mean to say I need to pay tax on employer’s contribution till date as well? Why?
Sorry I got confused with your answer. Since I am no longer working for past 2 years, there is no contribution either from me or from ex-Employer. The only addition is in form of interest credited by EPFO on the Employee contribution and Employer’s contribution. My questions were specific (1) Do I need to pay tax on entire interest credited to my account OR only for interest credited for on the accumulated portion of Employer’s contribution. (2) Where do I show this interest on my ITR? Is it under head “Income under other sources” by clubbing it with bank interest or somewhere else? You had mentioned ‘profits in lieu of salary’. Note that I have NOT withdrawn any amount from my EPF account. So please clarify. Thank You.
Dear Vai,
In case, you have not withdrawn any EPF amount then the entire interest paid on your EPF balance is taxable under the head ‘income from other sources’.
That makes sense. Thank you Sreekanth. Also I appreciate you for responding to queries from all of us patiently, its great community service by you.
Thank you dear Vai ..Keep visiting ReLakhs!
Dear Mr. Srikant,
Went through your beautiful and useful clarifications through this portal.
Well, I have a doubt pertaining to charging IT on PF accrued interest kept with Provident Fund even after retirement.
This issue of interest accrued is chargeable to IT has come to surface consequent to the ITAT Banglore’s decision. How can such a thing be applied retrospectively?
Retirees should have been informed on the eve of retirement of such a provision so that they could have decided to continue or withdraw. Further, had it been indicated then, TDS or on filing Return, Tax could have been paid on that.
Now expecting the person who withdraws to pay IT on the accumulated interest of previous years, is not ethical.
No doubt, retirees keep the PF Balance with the Fund as an Investment decision only.
Was there a further appeal in the ITAT Case of Bangalore?
How the Grievances of those retirees who continue to park their balance with the PF can be alleviated?
IT Department may kindly bring out an announcement, as a sort of gesture to such cases, by asking them to pay IT on the interest payable for the AY 2018-19 onwards.
Will you be able to appreciate the points put forth and shed light on the same?
Ravikumar
Dear Ravikumar,
Kindly note that this not a new Tax rule. The interpretation of an existing tax rule by most of us has been wrong.That’s it!
Agreed Mr. Sreekanth that it is a matter of interpretation. Even then it should be prospective, and more importantly since we do receive the interest it should be payable on withdrawal only. I agree with Mr. Ravikumar that like PPF this interest must also be exempt till retirement i.e. 58 age, and we must all represent to the government about the same. Thanks.
Dear Mohan,
Agree with your views! But, unfortunately, that’s how the tax law has been framed w.r.t EPF withdrawals..
Hi
My continous service in India is less than 5 years. I have shifted to UK on a dependent visa.
My wife got a job in UK and me and my 3 year old son got dependent visa.
Will this be considered as cirumstances beyond control as per income tax rule 8 and can on that basis my PF withdrawal become non taxable.
Dear Gaurav,
May not be considered as beyond control.
But, you can withdraw EPF full balance after being unemployed for minimum 60 days (or if not contributing to EPF scheme).
Thanks a lot sir.
So there is nothing I can do to save tax on the same?
Regards
Dear Gaurav,
In case, you do not have any other sources of Income (in India) or your total income is below basic exemption limit (Rs 2.5 Lakh) and in case EPFO deducts TDS then you can claim it as REFUND when you file your ITR.
Read : TDS & Misconceptions.
Is the tax deducted from EpF refundable by filing returns
Dear Anthony .. It depends on the quantum of income. If the income for that FY is say below basic exemption limit and TDS has been deducted then one can claim Refund (if any) by filing ITR.
Related article : Misconceptions on TDS (Tax Deducted at Source)
Dear Sreekanth
Due to the recent itat decision taxing the interest portion if it is withdrawn post retirement, could you please tell me whether the interest is to be taxesd under the head IFOS or is tax to be continued to be deducted by employer on interest accumulated post retirement? Could you please tell me which section of the act / rules gives clarity on this issue.
Dear Nyrica,
The interest accrued in each financial year during the non-contributory period should be declared in your Income Tax Return under the head ‘income from other sources’ and taxes (if any) have to be paid. So, interest income is taxable in the year in which it is accrued (on yearly basis).
Section 10 (12) of the I-T Act. refers to Payment Received from Recognised Provident Fund.
Dear Sreekanth,
If I am working with the company for 4 years and then I quit. But I do not withdraw EPF for another year (to complete 5 years) and then apply for withdrawal. In that case;
1. Will the withdrawal amount be tax free?
2. Only the interest of the last (non-contributing) year will be taxable?
How it will be treated?
Thanks,
Mukesh
Dear Mukesh,
1 & 2 – The contribution period is only considered ie 4 years. Withdrawal of funds will still be taxable.
Dear Sreekanth,
I am supposed to attain my retirement age of 60 with last day of working on 3rd Jan. I am covered under EPF. I findd that my salary for any month is paid at the beginning of the following month with EPF contribution shown in ‘Member Passbook’ sometime around 20th of that month. I also find that the interest in the Member Passbook is shown as ‘Interest till 31st March’ but generally appears sometimes in July. My last contribution for 3 days’ work in January will appear in the Passbook around 20th February. Now my question is 1) Do I need to apply for complete withdrawal 60 days’ after 20th February or 3rd January? 2) Shall I get the last installment of interest for the period April to the date of actual settlement or date of application or 20th February? 3) Or, is no interest for the above period is applicable since at the time of application, fund balance reflects no such interest for the above period and such entry is made only around July? 4) If I wait till say July, when such interest till 31st March is reflected and then apply for withdrawal, what is the tax implication. Kindly advise.
With best regards,
Arup Jyoti Bhowal
Dear Arup ji,
1 – 60 days from your date of leaving the services (kindly check with your employer as to what date they have upadated your Date of Exit as..)
2, 3 & 4 – Yes, total accumulated interest is payable.
Related articles :
Lump sum Investment options for Retirees/Senior Citizens | Where to invest my Retiral benefits to get Regular Income?
Thanks Sreekanthji for your clarifications. I shall check with my employer for the information of updated date of exit. For more queries in this regard, I shall again bother you later.
With best regards,
Arup Jyoti Bhowal
Hello Sreekanth,
I have got one more question related to EPS.
In my EPF passbook, the pension amount shown is just from my last employer, so how the EPS claim works ? Does the department bring and calculate all EPS from the date of contribution or they just give it what is shown in the passbook ?
Regards,
Sanjay
Dear Sanjay,
Did you work for multiple companies? Did you transfer funds from old EPF account(s) to the latest one?
Hello Sreekanth,
I have moved abroad in May 2017 (Contributed EPF and EPS for 8.2 years in India) and could not withdraw my PF before coming. I have two questions to clarify before I initiate the withdrawal.
1) Is the PF interest earned after May2017 is still taxable even if the income in India is below 2.5 lacs which is free tax slab. Heard from some friend that if the interest earned is less than 2.5 lacs, then it’s not taxable.
2) Can I withdraw my full EPF and EPS and are they not taxable ?
Thanks in advance.
Dear Sanjay,
1 – No, it won’t be taxable in such a scenario.
2 – You can claim full balances, it is not a taxable income. However, if your PAN is not linked to UAN, online withdrawals can be charged with TDS. In this case, one can claim it as refund (if any) by filing ITR..
Thank you Sreekanth for your reply. Do you know how long it takes to credit the money in the account after the Claim is settle down by EPF department. I could see that, in the UAN portal, the current status showing as ‘Claim Settled’ for the last 4 days however the amount has not received yet.
Thanks in advance.
Hello Sreekanth,
I just received money in my account but could see the deduction of around 7.85%. In my passbook the total amount is showing as X and I received X-8.5%. Do you know why ? Can you suggest me whom to contact for this ?
Thanks in advance.
Dear Sanjay,
If it is around 10% then we could have assumed it as TDS.
You may submit your grievance to the EPFO..click here..
Thanks Srekanth for your quick response. Yes it’s exact 10%, It was my miscalculation earlier. But do you know why have they deducted and whether will get that amont after registering the grievance ?
Dear Sanjay,
Is your PAN linked and verified in your UAN interface?
May I know your service period (num of years)?
Yes Sreekanth, PAN is linked and verified in UAN portal. My service period is : Feb 2009 to April 2017(8 years 2 months).
That’s strange dear Sanjay..
EPF withdrawals after 5 year service period are tax-exempt.
Kindly check your Form 26AS for FY 2018-19 after few days, in case you find TDS deducted, you may claim it when you file your ITR for AY 2019-20.
Okay, Sure Sreekanth. I have also filed grievance with EPF department as you suggested earlier.
Have you seen any cases where EPF department themselves has rectified the issue upon filing the grievance ?
Thanks in advance.
Dear Sanjay ..I dont think they will rectify based on the grievance request..
Hello Sreekanth,
Just wanted to share the final update from the EPF department regarding the Tax deduction, so the form 15G is not submitted and there is no way to submit it online, so don’t know if this is the loop hole in the system or ?
Details of Final Reply : 10 percent TDS deducted as form-15G not submitted.
Don’t know what should I do next?
Dear Sanjay,
As suggested – Kindly check your Form 26AS for FY 2018-19 after few days, in case you find TDS deducted, you may claim it when you file your ITR for AY 2019-20.
HI There,
I have a question, I was initially working with company X and where PF is maintained by a trust. Now I am in company Y and I filed my tax return. I got a notice from income tax that I have not declared my entire salary which is happened due to interest paid on my PF by company X which is reflected in form 26AS. What should I do. Do I need to declare that interest amount as other income and file tax again. Pls help
Dear Gaurav,
Yes, you can rectify/revise your ITR. Suggest you to kindly consult a CA.
Dear Sreekanth,
1) Thanks a lot for your timely advice, and As per PF commissioner’s office beyond the age of 58 years also, as long as I am employed until this age of 61 years and stopped employment in Dec’17.. my PF account would be active for another 3 more years and the interest would be paid., and I understand to leave my PF with commissioners office ( without withdrawing) for few years whatever possible as outside bank FD interest is lesser.
Also, they said if I go again for another employment now beyond 61 years and PF starts accumulating again.
2) And clarified only PENSION would not be there beyond 58years and hence employer also should not deduct beyond 58 years.
Regards,
Ravi SV
Dear Ravi ji,
Thank you for sharing this important information with us!
So, the EPFO pays interest on the contributions made to the EPF a/c beyond member’s age of 58 as well??
But EPS contributions are not accepted. Is my understanding correct?
Dear Sreekanth,
After having a discussion with EPF office, what I understand is in Pvt companies you may work as long as you can even beyond 70 years of age also, and their PF would be accumulated but pension ( EPS) would not be there after 58 years.
Also for 3 years after the last PF the last contribution, the account would be active and interest rate as per guidelines of the year ( Ex: present 2017-18 the interest rate is 8.55%).
so maybe as senior citizens, max FD interest rate in Banks is 7.6 %, so may be advisable to retain in EPF office.
Regards.
Dear Ravi ji,
Yes, your understanding is correct and thanks for the inputs!
After 58 years of age, EPF can be continued but not EPS. That’s correct!
Dear Srikanth
I had worked with Company X for nearly 9.5 years in India and have been contributing to PF which they held as part of a PF Trust. I never had a UAN then. I subsequently moved to another organization and started to contribute to PF in a newly created PF account. I had attempted to do a PF transfer through my current company (also a Private PF Trust) and after submitting Form 13, I missed to follow up. But the transfer did not happen while I assumed it had happened. Some 4 years down the line, Company X was taken over by another Company Y. Nearly 10 years later, when I realized that the PF transfer was not done, I got in touch with Company Y and am following up with the PF transfer. There has been a delay already for over 6 months and I am escalating through their organization. I have the following queries
1. Is there a grievance process to expedite the PF transfer between PF trusts – there is no transparency with respect to the status of my PF transfer
2. As my previous PF number does not have a UAN and now I have one – is it possible to check or complete this online
3. As my initial PF account was dormant for 10 years – what is the impact on the interests for this period – initially there was a ruling that no interest after 3 years of no contribution and subsequently it was removed – request clarity
Thank you in advance
Dear Dominic,
Yes, it can be a painful process to get the transfer done between two EPF acs maintained by PVT Trusts.
You need to follow it with respective employers only.
As per the EPFO’s notification issued in last FY, all in-operative EPF accounts get interest payment from April 2016 onwards.
I am working in IT with 30% taxable salary bracket. Now I am also in parallel working as a Marketing freelancer for US and taking work. My employer is deducting my 30% tax as per my salary. The question is how should I pay my taxes for the freelance work?
Will that be 1- presumptive tax scheme 2- ITR 30% on my freelance income or 3. GST? Please help. Thank you.
Dear Richa,
I believe that you may not be eligible to file tax return on Presumptive basis.
Suggest you to kindly consult a CA.
Dear Sir,
If the PF withdrawal amount is more 2.5 lakhs and contribution period is less than 5 years , as form 15 G is not applicable what is the percentage of tax deductible ? Is it 5 % as it is the tax rate for income slab 2.5 to 5 lakh?
Thank you in advance.
Dear Adarsha,
If it is offline claim, the EPFO may generally ask for Form 15G (even if not eligible, not sure why they require it).
I believe that they deduct 10% TDS.
Kindly note that the entire withdrawal is subject to taxes and the actual tax rate depends on the individuals slab rate.
Kindly read:
EPF & new TDS rules
TDS & Misconceptions
OUR ONE EMPLOYEE NAME WAS REGISTER IN PF OFFICE IS MD SHAHNAWAZ MALLICK. BUT HE WAS DIED. HIS DEATH CERTIFICATE IS WRITTEN SHAHNAWAZ MOLLICK, AND HIS OTHER DOCUMENT WAS VOTER ID , DRIVING LICENCE WAS SHAHNAWAZ MOLLICK. HE WAS DIED ON 2013 APRIL. WHY WAY HIS NAME WILL CHANGE IN EPFO REGISTER. KINDLY REPLY AS SOON AS POSSIBLE.
Dear AMANUL,
Sorry, I am not sure on this, kindly contact the EPFO.
Dear Sreekanth,
Thanks for such an informative blog and creating an awareness about the complicated EPF rules around withdrawals & TDS.
I worked in Company X for 5.5 years contributing to an EPF account number AAA then the same company transferred me to Germany on an international assignment where I still kept contributing to EPF for another 2 years using a different EPF account BBB. Subsequently, I took a local contract in the Singapore branch of the same company with no more contribution to EPF since July 2015.
I withdrew my PF balance from EPF account AAA in 2015 but the contribution in my EPF Account number BBB for a period of 23 months is still accumulated and I am no longer employed in India with no near future plans to return. I have 2 questions
1. I am assuming that the 23 months accumulation can be withdrawn subject to 10% TDS as I have a PAN. Is that correct?
2. I submitted the claim for full PF withdrawal in August 2017 (no contribution has been in that EPF account BBB since July 2015) but it was rejected by the EPFO stating the reason that “withdrawal not allowed for foreign worker till retirement age 58 is attained”. Can you please let me know if it is a valid reason for rejection of my claim? If not, is there an option to raise a grievance and will it be successful?
Thanking you in anticipation.
Regards,
Rishi
Dear Rishi,
Why did the same company create second EPF account (BBB)?
1 – Yes. It is a taxable income as the service period is less than 5 years.
2 – In fact, a foreign worker can submit the full withdrawal claim immediately before leaving abroad. Not sure whey did they reject based on the mentioned reason.. You may try withdrawing the funds again now.
Kindly read :
Single page CCF form for withdrawals
How to submit online PF claim?
How to withdraw PF through govt UMANG app?
Dear Sreekanth,
Thanks a lot for the prompt response. So, I will assume they should deduct 10% as TDS and pay the remaining amount. Correct?
The reason for second EPF account was that it was 2 separate legal entities within the same parent company.
I have filed a grievance to the EPFO and hope they can give a reason why I can’t withdraw the full amount before the age 58. Let’s see what they come back with now.
Regards,
Rishi
Dear Rishi,
1 – TDS can be 10% but as it is a taxable income, the applicable tax rate is as per your tax slab (it has to be disclosed in your ITR).
Dear Sreekanth,
Thank you for useful blogs. I have few queries in this regard that you will hopefully be able to clarify.
I was contributing towards PF with EPFO during my first 2 years of employment in India. I was abroad for about 3 years after this. I have returned to India subsequently and was employed for another 4 years, during which I was contributing to PF again. In summary, I have contributed towards EPF for about 6 years, with 3 years of non-contribution in between. Current situation is that I am not working for more than 2 months now, hence planning to withdraw EPF. Could you please clarify below in this situation:
1. The member passbook downloaded from EPFO website has entries corresponding to transfer of PF for initial 2 years of service, as well as the subsequent 4 years of service. However, when I login to EPFO unified portal, the ‘service history’ only shows the latest 4 years of service (initial 2 years of service is missing). If I place a request to withdraw EPF now, does EPFO consider only 4 years of service and hence the withdrawal will be subjected to TDS, considering it as less than 5 years service?
2. I have recently come to know about ‘one employee – one EPF account’ to consolidate past PF accounts and placed a request online with EPFO, assuming that my initial 2 years of service also will be added to ‘service history’ in unified portal (a) Is that understanding correct? (b) Does this mean EPFO will consider my total service as 6 years after this request is actioned by them, hence EPF withdrawal after that will not be subjected to TDS (though I was not contributing to EPF for 3 years in between)?
3. The employee share of EPF that I am eligible to withdraw is about 5 lakh rupees. Is it considered as other sources of income and subjected to income tax also (irrespective of TDS is applicable or not), based on the tax bracket for the respective financial year?
4. Understand from your blog that the interest income accrued during non-contributory period is taxable. I guess no TDS will be applicable for this interest, but only income tax. If so, what is the percentage of income tax – Is it added to other sources of income and will be subjected to applicable tax, based on tax bracket for the respective financial year?
Dear Raj,
1 – If the transfer has been successfully completed, the service period of 6 years will be considered. In such a case, tax is not applicable. You can submit online grievance request and check your total service period.
2 – Did you submit transfer request earlier? from EPF 1 to EPF 2??
If not, you can use one EPF facility. Yes, your understanding is correct.
3 – If service period is more than 5 years, the entire EPF balance withdrawal is tax-free.
4 – TDS is part of Income tax. Kindly read : TDS & misconceptions!
Dear Sreekanth – thank you for the clarifications provided. I have submitted my transfer request from EPF 1 to EPF 2 couple of days back only, so I guessthis will take atleast couple of weeks for processing. I have also submitted online grievance request now with EPFO to check service period and accordingly will take it forward.
Dear Sir,
I retired at the age of 58 Years & my PF is maintained by Company’s trust. Whether the interest earned till PF disbursal by the company will be taxed? Or will I have a window period of 36 months, post retirement?
dear sir,
EPF with drawl claim status showing has been settled .Payment sent on 14th Dec 2017 via NEFT ,but till now money has been not credited .Please advise
Regards
Dear Sreekanth..It takes 2 to 5 business days to get the credit (from the date of claim settlement).
Meanwhile, kindly cross check your bank account details given in the claim form/linked to UAN.
Dear Sreekanth,
Thanks for the detailed article. Quick questions
1. It seems that the moment you stop contributing, you should withdraw your EPF (after a few months of non-contribution) to avoid paying taxes – would it not be prudent to withdraw and invest yourself in avenues which have better returns and less tax (for e.g. MFs)
2. If I have just worked for 7 years, I won’t be eligible for Pension and so can I withdraw my EPS as well? Is there a separate form for this or will EPFO return that to me on their own?
3. if I withdraw my EPF and EPS contributions and start getting a salary again in future where I start my EPF contributions again, the cycle of years of service will start again but will my UAN, EPF number etc change?
Dear Vikash,
1 – If one is unemployed/self-employed and has a long investment time-frame, can surely consider better investment alternatives for wealth accumulation.
2 – If you are not employed and currently not contributing to EPF scheme, can withdraw full EPF and EPS. You can submit withdrawal claim online or offline.
3 – Yes, cycle for calculating of service period will restart. Your UAN remains the same. You can submit the same UAN to your next employer, they will issue new EPF ac (Member-ID) which will be linked to your existing UAN.
Thanks a lot for the quick reply! Really Appreciated!!
Thanks for informative article as usual.
If one retires at the age of 60 years or more, will the contribution be recognised for 80C beyond the age of 60 years, will interest earned on contribution also continue to be tax free or contribution and interest earned up to 58 years only will be recognised and tax free?
Kindly clarify
Mahesh
Dear Mahesh,
If one is retiring and not employed, then how is it possible to contribute to EPF?
I believe if one is employed even beyond 58 years and contribute to EPF scheme, his/her contributions are eligible for tax deduction and regular interest is payable, which should be tax-free.
Dear Sreekanth Reddy garu,
My last contribution to my epf account is October,2016. Shall I continue my account upto age of 58 years. Now my age is 52 years. Shall I get interest upto age of my 58 years. How much percentage of interest is taxable if no contributions to my epf account? Am I eligible for pension ? Please give reply.
Dear PRABHAKAR garu,
EPFO will pay interest on your accumulate PF balance till 58 years.
However, the interest credited between Oct 2016 till the age you attain 58 years, is taxable as per the applicable income tax slab.
If you have contributed to EPF for more than 10 years then pension is applicable to you.
Related article : Higher EPS Pension by EPFO – Impact of recent Supreme Court Judgement for EPS Subscribers & Pensioners
drawing officer says first pay tax in salary up to Feb-2018 and at e-filling time shown medical insurance prim um amount and national pension system amount and get refund .it is correct method are not any supporting circulars regarding above send me
Dear giridhar,
If you submit investment declaration/Proofs to your employer then they can calculate your projected tax liability and deduct TDS. They will then issue Form-16. You can prepare your ITR based on this and calculate actual tax liability (nil tax/refund/tax dues).
In case, you do not have proofs or not have made investments as of now for tax saving or your employer is not accepting the proofs then you can claim tax deductions (if any) while filing your ITR and claim refund (if any).
Kindly read:
Investment declaration & proofs
List of IT deductions for FY 2017-18