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Home Personal Finance Changes in EPF rules, PF contribution tax continues to be suspect, know...

Changes in EPF rules, PF contribution tax continues to be suspect, know what is the reason?

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In the General Budget 2021, Finance Minister Nirmala Sitharaman made it taxable to deposit more than 2.50 lakh rupees annually in EPF. That is, income tax will be charged from normal rates on interest received on provident fund contributions above Rs 2.5 lakhs in a year.

New Delhi: Since April 2021, there has been a big change in the rules related to PF Rules. In the General Budget 2021, Finance Minister Nirmala Sitharaman made it taxable to deposit more than 2.50 lakh rupees annually in EPF. That is, income tax will be charged from normal rates on interest received on provident fund contributions above Rs 2.5 lakhs in a year. However, this will only apply to the employees’ contribution, it will not have any effect on the contribution of the employer (company).




Looking at the rules issued, there was some confusion, after which the employees and tax experts demanded some time to deal with it.

In the last year’s budget, Finance Minister Nirmala Sitharaman had decided to contribute employers to the Provident Fund, National Pension System (NPS) and approved superannuation funds of more than Rs 7.5 lakh annually. Let me tell you, it took 13 months for the Income Tax authorities in North Block to prepare the rules, which came on March 5 this year – four weeks before the close of the financial year.

Let us tell you that the tax exemption limit has been fixed for the interest on Employees Provident Fund (EPF) and Voluntary Provident Fund (VPF), on the interest on provident fund contributions above Rs 2.5 lakh in a year. Now tax will be collected from normal rates.

what the first rule

according to earlier rules, EPF, VPF and Igjempted provident fund is exempt of income tax on interest Trusts , No matter how high the PF contribution.

This new rule of the central government will have a direct effect on people with higher salaries who use VPF for tax-free interest. According to the PF rules, the company’s contribution has been fixed at 12 per cent of the basic salary. However, if any employee wishes, he can increase his contribution.

How many employees are affected?

Let me tell you, this decision of the government will affect less than one percent of the employees. The government says that those who are contributing more than 2.5 lakhs annually to the EPF, their number is less than 1%.

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