There has been a big change in the rules of Employees’ Provident Fund (EPF). This rule is only for those EPF account holders whose contribution, in a financial year, is more than Rs 2.5 lakh. Under the new rule, such account holders will have to maintain two separate EPF accounts.
Why is it necessary to have two accounts: In fact, while presenting the General Budget this year, Finance Minister Nirmala Sitharaman had talked about levying tax on the interest received on EPF contribution of more than Rs 2.5 lakh in the financial year. For this, the contribution made by the employer was not included in the calculation. Now such account holders will have to maintain two separate EPF accounts. The tax will be calculated on this basis only.
The Central Board of Direct Taxes (CBDT) has also issued a notification in this regard. According to the notification, the new rule is applicable from the financial year 2021-22. However, this will be effective from 1 April 2022. Let us tell you that the contribution made in the EPF account till March 31, 2021 is tax free.
How many people will be affected: Only one percent of provident fund account holders will be affected by the tax proposal imposed on the interest received on EPF. There will be no impact of this tax proposal on other account holders as their annual PF contribution is less than Rs 2.5 lakh.
What Experts Say: Sudhir Kaushik, Co-Founder and CEO, TaxSpanner, said that another account with taxable contributions will be automatically opened. He said, “No account holder or employer is in a position to open this account himself. According to the law, it is the responsibility of the PF officers to maintain it.” At the same time, Shailesh Kumar said that the notification issued by the CBDT has finally put an end to the ambiguity created during the Union Budget. This was not clarified in the budget. How tax will be recovered from interest earned on EPF contribution above a limit.
