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Career breaks may make post-employment EPF interest taxable

Taking a career break? Your EPF balance may stay tax-free, but interest earned after leaving the job could be taxable · livemint.com

An EPF account may keep earning interest after someone leaves a job.

The money saved before leaving and the interest earned afterward may be treated differently for tax.

Some tribunal rulings say the later interest can be taxable.

This may apply even if the person already worked for five years.

The five-year rule can help determine whether the saved balance is exempt when it is withdrawn.

Interest earned during a job break may still be taxed in the year it is earned.

Moving the account to a new employer can help keep service years connected.

But that transfer does not change how the break-period interest is treated.

Key facts

Relevant provision: Section 10(12) of the Income-tax Act
Five-year condition: Relevant to the tax treatment of the accumulated EPF balance; it does not automatically exempt interest earned after employment ends.
Post-employment interest: Some ITAT rulings treat it as income from other sources, taxable in the year it accrues.
Article example: A ₹10 lakh EPF balance earns ₹80,000 interest during a two-year job break.
EPF transfer: Transferring the balance to a new employer helps preserve continuity of service for the five-year condition.
Withdrawal before five years: Withdrawal of the accumulated balance can become taxable if the employee has less than five years of continuous service.

livemint.com · 2 hrs ago