How can I declare my interest income on provident fund account for financial year 2024-2025 now?

Retirement can come with a number of tax-related questions, especially when money continues to remain invested in an EPF account after an employee leaves the job. One such issue is the tax treatment of interest credited on the EPF balance after retirement. Today's Q&A explains such details in response to a query by a reader.

In respect of income under the head “Profits and Gains of Business or Profession” or “Income from other sources” the taxpayer has two options to offer the income under these two heads either on accrual basis or on receipt basis. The taxable interest on provident fund account is taxed under the head “Income from Other Sources” so you can either offer it on accrual basis or on receipt basis.

In case you wish to offer the same on accrual basis as the time period for filing the revised Income Tax Return for the financial year 2024-2025 corresponding to assessment year 2025-2026 is over, you cannot file a revised ITR now offer this interest income. However, the Income Tax Act 1961 which applies for and upto assessment year 2025-2026 provides for filing of an Updated ITR within 48 months from the end of the assessment year. So you can file an Updated ITR disclosing the proportionate interest for financial year 2024-2025 by paying additional tax in addition to the tax and interest due.

If you do not want to pay the additional tax, you can offer the interest for that year in the year in which you withdraw the outstanding balance in provident fund account on receipt basis.

Please note that if you decide to offer it on receipt basis, you may have to pay tax at higher slab rate if your total income including such interest is high.