EPF account and tax related query

I have the below query regarding my EPF account, which is current been held with the Company PF trust account. Would be very helpful if my query can be clarified please.

I worked for a company for 25 years and had been contributing to the EPF all these years. I quit my job in 2017 and have not joined any other organization/employed since. I am currently 51 years old. Can you please let know:

  1. Will I continue to earn interest on my EPF till I am 58 years, though my account will be tagged as "Dormant / InOperative Accounts", since there is no contribution been made for 3 yrs?
  2. Will this interest accrued post 2017 attract any tax later when I plan to withdraw my funds post 58 years of my age?
Replies (1)

Great questions about your EPF! Here's a clear breakdown:

1. Interest on EPF after leaving the job (account dormant)

  • Yes, you will continue to earn interest on your EPF balance till you turn 58 years old (the age of retirement), even if no further contributions are made.

  • However, the interest rate for inactive accounts (no contribution for 36 months) is different. It is currently lower (around 4.5%) compared to the regular interest rate for active accounts (which is around 8.15% - 8.65% as notified annually).

  • Your EPF account will be tagged as "Inoperative/Dormant" but it continues to accumulate interest at this lower rate until you withdraw or reach 58 years.

2. Tax implications on interest earned post leaving job

  • Interest earned on EPF balance up to 5 years of inactivity is tax-free.

  • However, interest earned on EPF after 5 continuous years of inactivity (i.e., no contributions) is taxable as "Income from Other Sources" in the year it is credited.

  • Since you left in 2017 and didn't contribute after that, from 2022 onwards (5 years later), interest earned is taxable.

  • When you withdraw the entire balance after 58 years, the interest portion credited after 5 years of inactivity would have already been taxed in the respective years.

  • The principal amount and interest earned during active employment remain tax-free on withdrawal if you have completed 5 continuous years of service.


Summary:

Point Status
Interest accrual post 2017 Yes, at reduced interest rate till 58 years
Tax on interest for first 5 years of inactivity Exempt from tax
Tax on interest after 5 years inactivity Taxable as income in the year of credit
Withdrawal at 58 years Principal + interest during employment tax-free; interest after 5 years inactivity already taxed

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