The government will charge tax on the provident fund account from the new financial year. This is because some people are taking undue advantage of this welfare scheme by deducting excess amount. The government has made such a rule to stop them.
It is also news that EPFO is going to make some new changes in the rules of PF. Existing PF accounts can be divided into two parts from 1st April 2022. It is worth noting that last year the government had notified new rules for income tax. Now under this PF accounts will be divided into two parts. In this, in case of contribution in excess of the limit of the employee, the interest income will be taxed. Actually, the purpose of the new rules is to prevent high-income people from taking advantage of the government welfare scheme.
This news is most important for both private and government employees. That is, income tax will be levied on the return of PF account from April 1, 2022. The Income Tax Department has implemented this rule. The CBDT will implement the Income-tax (25th Amendment) Rule 2021 after this date. Both Employee Provident Fund (EPF) and General Provident Fund (GPF) accounts will come under the purview of this rule.
Let us tell you that Finance Minister Nirmala Sitharaman made a special announcement in the budget 2021. He had imposed a tax free contribution cap of up to Rs 2.5 lakh in the EPF account. That is, the interest income of the contribution on top of it will be taxed. At the same time, in the case of government employees, the limit of tax free contribution to GPF is Rs 5 lakh per annum.
According to the CBDT, deduction of above Rs 2.5 lakh in EPF and above Rs 5 lakh in GPF has been brought under the purview of tax. Tax will be collected from the salary. Understand in simple language, if a private job or a government employee has contributed above this limit, then the interest income will be considered as income and the department will charge tax on it. This tax deduction will be mentioned in Form 16.
It is also news that EPFO is going to make some new changes in the rules of PF. Existing PF accounts can be divided into two parts from 1st April 2022. It is worth noting that last year the government had notified new rules for income tax. Now under this PF accounts will be divided into two parts. In this, in case of contribution in excess of the limit of the employee, the interest income will be taxed. Actually, the purpose of the new rules is to prevent high-income people from taking advantage of the government welfare scheme.
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