The federal government will tax the curiosity earned on Provident Fund (PF) contributions exceeding ₹2.50 lakh yearly. This comes at a time when the Staff Provident Fund Organisation (EPFO) has lowered rates of interest to eight.1% for the present monetary yr 2021-22 (FY 22).
“The curiosity earned on the worker’s contribution to the provident fund account will probably be taxed if the contribution quantity in a monetary yr exceeds ₹2.5 lakh. If there isn’t any employer contribution within the provident fund account, the brink will probably be ₹5 lakh a yr,” stated Archit Gupta, Founder and CEO – Clear.
What does the most recent PF taxation imply for you?
The CBDT has notified that organisations want to take care of two separate PF accounts. One of many accounts will probably be for taxable contributions, whereas the opposite will probably be for non-taxable contributions beginning 1st April 2021. “The curiosity accrued on the contributions deposited within the taxable account within the EPF will probably be taxed,” stated Archit Gupta.
He additional defined the taxation on Provident Fund contributions above ₹ 2.50 Lakh with an instance. For instance, Sanju is a salaried worker, and he makes a contribution of ₹1.5 lakh in EPF and ₹1.5 lakh in VPF accounts through the FY 2021-22. The opening stability of the PF account as of 1st April 2021 is ₹20 lakh. The overall contribution to the provident fund account through the FY 2021-22 is ₹3 lakh. Therefore, ₹2.5 lakh EPF contribution will probably be credited to the non-taxable account, and ₹50,000 will probably be credited to the taxable account. The stability within the non-taxable account as of thirty first March 2022 shall be ₹22.5 lakh (the opening stability as of 1st April 2021 is non-taxable), and within the taxable account shall be ₹50,000. Subsequently, the curiosity of 8.5% relevant for FY 2021-22 on ₹50,000 shall be taxable within the palms of Sanju.
Supply: Live Mint