EPF charge awaits nod; contributions being sorted for taxation

The rate of interest to be offered by the Employees’ Provident Fund Organisation (EPFO) for monetary 12 months 2020-21 continues to be awaiting approval from the Finance Ministry, a senior labour ministry official mentioned. “The proposal had been sent to the Finance Ministry for approval. It’s yet to be ratified by them,” the official instructed The Indian Express.
The Fund’s Central Board of Trustees (CBT) had in March really helpful retaining 8.5 per cent rate of interest for 2020-21. This charge, the identical as final 12 months’s, is the bottom provided by EPFO in eight years.
The really helpful rate of interest for FY21 is by norm ratified by the Finance Ministry, following which it’s notified by the Labour Ministry. The Finance Ministry has been nudging the EPFO to cut back the speed to a sub-8 per cent stage consistent with the general rate of interest situation.
Meanwhile, the EPFO is working upon implementing the Budget proposal for taxing curiosity revenue on contributions made to the EPF past Rs 2.5 lakh (for personal sector staff) and Rs 5 lakh (for presidency sector staff). “The EPFO is working on the separation of taxable and non-taxable contributions in the accounts of the subscribers. It is to be done for about 1.2 lakh accounts and not the entire active 5 crore accounts, so it will not be a major issue to separate for those subscribers,” the official mentioned.
The tax division had not too long ago notified guidelines to implement the Budget announcement. The Budget proposal had famous that the federal government has discovered cases the place some staff are contributing big quantities to those funds and are getting the good thing about tax exemption in any respect levels — contribution, curiosity accumulation and withdrawal. With an intention to exclude excessive net-worth people (HNIs) from the good thing about excessive tax-free curiosity revenue on their giant contributions, the federal government had proposed to impose a threshold restrict for tax exemption. This can be relevant for all contributions starting April 1, 2021. The tax division had not too long ago notified guidelines to implement the Budget announcement.