From 1 April, the curiosity on provident fund (PF) contributions of workers throughout India beneath a sure bracket will probably be taxed. The central authorities will tax curiosity on EPF contributions above ₹2.5 lakh yearly.
Listed here are key issues to know in regards to the new PF tax rule
Any curiosity credited to the provident fund account of an worker will probably be tax-free just for contributions as much as 2.5 lakh yearly and any curiosity on an worker’s contribution over 2.5 lakh shall be taxed within the palms of the worker 12 months after 12 months.
The brand new PF guidelines will principally affect the high-income earners. It’s possible that in future the tax profit could also be step by step withdrawn to tax a minimum of one a part of the EEE regime,” in response to Vikas Vasal, Nationwide Managing Companion, Tax at Grant Thornton Bharat.
Workers can take coronary heart from the truth that the curiosity on extra contribution which can grow to be taxable and never the contribution itself.
“The surplus contribution can’t 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 will probably be 5 lakh of worker’s contribution,” stated Tax Skilled Balwant Jain.
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 Workers Pension Scheme (EPS).
For the implementation of latest guidelines, a brand new Part 9D has been included beneath the Revenue Tax Guidelines, 1962, in response to a notification issued by the Central Board of Direct Taxes. The CBDT frames coverage for the I-T division.
PF accounts are necessary for workers incomes as much as ₹ 15,000 monthly in any agency with over 20 employees. The EPFO, earlier this month, determined to decrease the rate of interest to a four-decade low of 8.1% for 2021-22.
Supply: Live Mint