Rajesh 77952 - Rediff Gurus

Hello Sir, I resigned my last job in Mar-2015. My EPF contribution stopped after 9.5 years of continuous employment with last employer in Mar-2015. I am getting EPF interest every year after 2015. As I am self employed since 2015 and file ITR showing EPF interest as 'Income From Other Source' since 2018. This is making me pay extra tax every year. I have not withdrawn any amount from my EPF account yet and my age is 53 years. I am showing PPF interest as exempt income. EPF interest is added to FD interest and is shown as 'Income from other source'. (This year I could see provision to add row with heading to show as 'EPF interest' separate from FD Interest under 'Income from other source' head ) Am I doing right by including epf interest in 'Income from Other Source' while filing ITR? Or they will tax me again on EPF interest income when I will withdraw EPF in future?

Ans: You have maintained the EPF for a long period. That is a positive retirement asset.

Since employment ended in March 2015, your EPF contributions stopped then.

The account continued earning interest after that.

» Is Your Current Tax Treatment Correct?

Yes, generally your approach is correct.

Interest credited to an EPF account after leaving employment can become taxable.

This is especially relevant when there are no further EPF contributions.

Such taxable interest is normally reported under Income from Other Sources.

Therefore, including the taxable EPF interest in your ITR is the safer approach.

The separate EPF interest row in the ITR is also useful for proper reporting.

» Will EPF Be Taxed Again When Withdrawn?

No, the same interest should not be taxed twice.

You are already offering the taxable post-employment EPF interest annually.

When you eventually withdraw the EPF balance, the withdrawal itself should not again tax that same interest.

However, the exact tax treatment depends on the nature of the EPF balance.

It also depends on whether the withdrawal qualifies for exemption.

Your continuous service was around 9.5 years.

This point needs careful checking because EPF withdrawal rules consider service period.

There can also be specific rules regarding transfer of previous EPF service.

» Important Point About 10 Years

Please check your exact recognised EPF service period.

You mentioned 9.5 years of continuous employment.

For certain EPF withdrawal benefits, the 10-year service threshold is important.

So, do not withdraw the EPF before checking this aspect.

Your age is 53, which also gives you some planning flexibility.

» PPF Interest Is Different

Your treatment of PPF interest as exempt income is generally correct.

PPF enjoys a different tax treatment from post-employment EPF interest.

Therefore, do not treat both interests in the same manner.

» One More Important Check

Please obtain your latest EPF passbook.

Check the following:

Employee contribution.
Employer contribution.
Interest credited each year.
Date of last contribution.
Date of each interest credit.

Keep these records with your ITR documents.

This will help avoid confusion during any future EPF withdrawal.

» My Assessment

Based on the facts provided, reporting the taxable EPF interest annually is appropriate.

You should not stop reporting it merely to reduce present tax.

Doing so could create a tax issue later.

Also, you should not expect the same interest to be taxed again during withdrawal.

However, because your service period is around 9.5 years, get the withdrawal eligibility checked carefully.

A small difference in service calculation can have important consequences.

» Final Insights

Your present reporting approach appears broadly correct.

Continue reporting taxable EPF interest under the appropriate ITR section.

Do not treat EPF interest like PPF interest.

Before withdrawal, verify your total recognised EPF service period.

Also check whether your EPF account has any other tax implications.

Best Regards,

K. Ramalingam, MBA, CFP,

AMFI-Registered MFD – ARN 4188

www.holisticinvestment.in

https://www.linkedin.com/in/ramalingamcfp/

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