The central authorities will tax curiosity on Employees Provident Fund (EPF) contributions above ₹2.5 lakh yearly. Employees throughout India are required to have a PF account. From 1 April 2022, PF accounts are prone to be divided into two elements – taxable and non-taxable accounts below the set of latest Income tax guidelines.
“Gradually, the Exempt Exempt Exempt tax advantages below completely different saving schemes, together with Provident Fund, are being dropped at tax at one stage. Therefore, for high-income earners, these provisions have been launched to tax the profit above a sure threshold. It is probably going that in future the tax profit could also be progressively withdrawn to tax at the very least one a part of the EEE regime,” mentioned Vikas Vasal, National Managing Partner, Tax at Grant Thornton Bharat.
1) Any curiosity credited to the provident fund account of an worker shall be tax-free just for contributions as much as 2.50 lakh yearly and any curiosity on an worker’s contribution over 2.50 lakh shall be taxed within the palms of the worker 12 months after 12 months.
2) “After rationalization of Provident Fund in price range 2021, PF rate of interest earned on funding past ₹2.5 lakh each year is taxable if each worker and employer contributions in PF or EPF account,” mentioned SEBI registered tax and invested skilled Jitendra Solanki.
3) “The price range has offered that any curiosity credited to the provident fund account of an worker shall be tax-free just for contributions as much as 2.50 lakh yearly and any curiosity on an worker’s contribution over 2.50 lakh shall be taxed within the palms of the worker 12 months after 12 months.Please word it’s the curiosity on extra contribution which is able to turn out to be taxable and never the contribution itself. The extra contribution cannot be taxed because the contribution is made by the worker from his wage which already will get taxed. In case the employer doesn’t contribute to the provident fund of the worker then the brink relevant shall be 5 lakh of worker’s contribution,” mentioned Tax Expert Balwant Jain.
4) “The provident fund workplace or the worker PF belief will keep two accounts for this goal. one with contributions throughout the threshold and the opposite (second) for contribution over the brink. It is curiosity on the second account which shall be taxed yearly. So it isn’t just for the 12 months of contribution but additionally for all the following years that the curiosity will turn out to be taxable,” Jain added
5) The employer contributes 12% of primary wage plus dearness allowance to EPF and deducts one other 12% from the worker’s wage; 8.33% of the employer contribution goes to Employees Pension Scheme (EPS).
6) For the implementation of latest guidelines, a brand new Section 9D has been included below the Income Tax Rules, 1962, in keeping with a notification issued by the Central Board of Direct Taxes. The CBDT frames coverage for the I-T division.
7) Previously, the federal government had talked about that the transfer would affect lower than 1 per cent of taxpayers.
8) EPF accounts are obligatory for workers incomes as much as ₹ 15,000 per thirty days in any agency with over 20 staff.
9) The EPFO, earlier this month, determined to decrease the rate of interest to a four-decade low of 8.1 per cent for 2021-22.
10) The fee was 8.5 per cent for 2020-21.
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