Employees Provident Fund (EPF) – myITreturn Help Center

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Employees’ Provident Fund (EPF): Contributions, Interest, Withdrawal and Tax

AY 2026-27: Income-tax Act, 1961
Tax year 2026-27: Income-tax Act, 2025

EPF is a retirement savings arrangement in which the employee and employer contribute to a provident-fund account. Although EPF is generally tax-favoured, excess contributions, excess interest and premature withdrawals may become taxable.

Tax Treatment of Recognised Provident Fund

Component	Tax treatment
Employee contribution	Eligible for section 80C deduction within the overall ₹1.5 lakh limit under the old tax regime. The deduction is generally unavailable under the default new regime.
Employer contribution	Contribution up to 12% of salary is generally exempt, subject to the combined ₹7.5 lakh employer-contribution limit for recognised PF, NPS and approved superannuation fund.
Excess employer contribution	Aggregate contribution above ₹7.5 lakh is taxable as a perquisite. Annual accretion attributable to that excess is also taxable.
Interest on employee contribution	Interest attributable to employee contribution above ₹2.5 lakh a year is taxable where the employer also contributes. The threshold is ₹5 lakh where there is no employer contribution.
Withdrawal after five years	Generally exempt. Continuous service with previous employers can count where the PF balance was properly transferred.
Withdrawal before five years	May be taxable unless an exception applies, such as ill health, closure of business, reasons beyond the employee’s control or transfer to another eligible fund.

Five-year test: Withdrawing after changing jobs does not automatically qualify for exemption. Transfer the old PF balance so that eligible continuous service can be considered.

TDS on Premature Withdrawal

Section 192A generally requires TDS at 10% where a taxable accumulated PF balance exceeding ₹50,000 is paid. A higher rate may apply if PAN is not furnished. Eligible taxpayers may submit Form 15G or Form 15H where the prescribed conditions are satisfied.

How Premature Withdrawal Is Taxed

Where the recognised PF exemption fails, the earlier tax benefits are broadly reversed:

Employer contribution and related interest may be taxed as salary.
Interest on the employee’s contribution may be taxed as income from other sources.
Earlier section 80C deductions may require adjustment under the applicable rules.

TDS is not the final tax. Report the taxable components correctly in the ITR and claim the TDS credit appearing in Form 26AS. The final liability may be higher or lower than the TDS.

ITR Reporting Checklist

Check Form 16 for taxable employer contributions and perquisites.
Check Form 26AS/AIS for section 192A TDS.
Separate exempt withdrawal from taxable employer contribution and interest.
Report taxable interest on excess employee contribution where applicable.
Retain EPFO passbook, transfer records and service history.

1961 Act and 2025 Act Transition

EPF income and withdrawals relating to FY 2025-26 and AY 2026-27 are governed by the Income-tax Act, 1961. Amounts arising in tax year 2026-27 are governed by the Income-tax Act, 2025. The broad tax treatment continues, but section numbers and reporting forms should be selected according to the applicable year.

Practical action: Before withdrawing, confirm total continuous service and whether a PF transfer is possible. A transfer may preserve retirement savings and avoid premature-withdrawal tax.

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