Will interest on EPF balance earned till age 58 be tax-free after I stop work?

I left my job in 2025 at the age of 48 after working for 18 years. During this period, both me and my employer contributed regularly to my EPF account with the Employees’ Provident Fund Organization (EPFO). My accumulated EPF balance at the time of leaving the job was ₹50 lakh, including the employer’s contribution.

During my service period, my own contribution to EPF never exceeded ₹2.5 lakh in any financial year. I'm planning to keep my EPF balance intact with the EPFO until I turn 58, so that the corpus continues to earn interest. I plan to withdraw the entire amount at that time. I would appreciate clarity on the following:

1. Will the interest earned on the EPF balance between age 48 and 58 remain tax-exempt even though I am no longer employed?
2. When I withdraw the entire balance at age 58, will any part of the corpus or accumulated interest become taxable?
3. If I make partial withdrawals before age 58—for example, to fund my children’s higher education—would those withdrawals be taxable?
4. Would such partial withdrawals have any impact on the taxation of the remaining EPF balance that I plan to withdraw at age 58? - name withheld on request

—Name withheld on request

Response:

It is assumed that after leaving your last job in 2025 at the age of 48, you have not taken up employment with any other establishment covered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and that you do not intend to do so in the future.

Under the provisions of the Income-tax (IT) Act, the accumulated balance standing to the credit of an employee in a recognized provident fund is exempt from tax if (i) the employee has rendered continuous service with the employer for a period of five years or more (period of service with previous employers is also included for this purpose, provided the provident fund balance has been transferred from the previous employer(s) to the current account) or (ii) if such continuous service (being less than five years) was terminated due to ill-health or contraction or discontinuance of employer’s business or (iii) any other cause beyond the control of the employee.

Since you have completed more than 18 years of continuous service and have contributed to the Employees’ Provident Fund (EPF) throughout this period, the accumulated balance standing to your credit up to the date of cessation of employment will be exempt at the time of withdrawal.

However, the interest accrued on the accumulated balance, post cessation of employment (the period when no contribution is made to the EPF), is taxable, irrespective of your total contribution period with EPF. Thus, the interest earned by you from the date of cessation of employment in 2025 till the date of withdrawal, shall be taxable.

The tax treatment at the time of your final withdrawal at age 58 would follow the principles noted above. While the accumulated balance as of your last date of employment is exempt, the interest that accrues thereafter—during the period of non-employment—would be taxable.

With respect to partial withdrawals before attaining the age of 58, such as withdrawals made for your children’s higher education, the same taxability as noted above would apply. Accordingly, as you have rendered more than five years of continuous services and have contributed to the EPF for such period, the taxability of the partial withdrawals will also be as per the specified provisions in point 1.

The partial withdrawals will not have any impact on the taxation of the remaining EPF balance. The taxability of the remaining balance withdrawn at 58 will continue as per the specified provisions in point 1.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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