EPF Interest: Every fiscal year, EPF members eagerly wait for the Employees’ Provident Fund Organization (EPFO) to credit their interest. However, the EPFO often delays the credit, which creates tax complications for many members.
To clarify, if your annual EPF contribution exceeds ₹2.5 lakh (or ₹5 lakh for government employees), the EPFO applies tax deducted at source (TDS) on the excess interest earned. If your EPF account is linked to your Permanent Account Number (PAN), the EPFO deducts TDS at 10%; otherwise, it deducts 20%. The EPFO does not withhold TDS if the taxable interest is less than ₹5,000.
Tax Confusion?
The delay in crediting interest to EPF accounts often confuses members about which fiscal year they should report and pay taxes on the taxable interest. Although the EPFO passbook shows interest accumulated up to March 31 of a fiscal year, the EPFO credits the interest in the following year. For example, the government approved the interest rate for FY25 only in May 2025, so the EPFO didn’t credit the FY25 interest by March 31, 2025. The EPFO has credited FY26 interest to a few subscribers over the past few weeks.
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Here’s What To Do:
Tax experts advise that you should pay tax on the taxable PF interest using the credit method. This means you should report the interest in the year the EPFO credits it and deducts TDS. They recommend avoiding the accrual method while filing your ITR this year, so don’t pay tax on the delayed interest credited for FY25. Instead, report and pay tax on that income in FY26, when you receive it. By following this approach, you can avoid tax discrepancies and prevent unnecessary back-and-forth between the EPFO and the Income Tax Department.
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