New GPF Rules: In August 2021, the Central Government amended the Income Tax Rules 1962 for the calculation of tax on GPF interest. According to this, the limit for putting money in GPF is Rs 2.5 lakh for non-government employees and Rs 5 lakh for government employees.
new Delhi. From April 1, 2022, interest earned on General Provident Fund (GPF) will be taxed. This was announced by Union Finance Minister Nirmala Sitharaman in her Budget 2021 speech.
After this, in August last year, the Central Government amended the Income Tax Rules 1962 for calculation of tax on GPF interest. It has been clarified in the August directive that the limit for putting money in GPF is Rs 2.5 lakh for non-government employees and Rs 5 lakh for government employees.
The Department of Revenue has issued a notification in this regard on February 15, 2022. It was said that such government employees, whose GPF has deposited more than Rs 5 lakh in the financial year 2020-21, will have to give information about the interest received on it. This information was asked to be given before the salary of February 2022, so that TDS can be deducted from their salary and allowances.
Who will have to pay tax on GPF?
According to Rule 9D of the Income Tax Rules, 1962, all non-government employees whose employer contributes more than Rs 2.5 lakh annually to the provident fund will have to pay tax on the interest earned on their EPF. The Central Board of Direct Taxes last year declared 9DIncome TaxRule, was incorporated in 1962.
Similarly, all government employees (whose employer does not contribute) and whose provident fund deposits more than Rs 5 lakh annually will have to pay tax on the interest earned on GPF.
How will tax be calculated?
First, from the financial year 2021-22 onwards, there will be two separate accounts under the PF account. Its purpose is to segregate taxable and non-taxable income. Taxable and non-taxable income has been described in the government notification as follows.
Non-taxable income will include these things
1. Closing balance in the account as on March 31, 2021.
2. Contribution made by the employee to the account in the previous year 2021-22 and subsequent years, which are not included in the taxable contribution account.
3. Interest earned on 1 and 2 above
These things will come in taxable contribution
1. Any contribution made by the employee to the account during the previous year 2021-22 and subsequent previal years, which is more than the prescribed limit.
2. Interest found on 1 above.
This means that all the contributions made by the employees till March 31, 2021 will be non-taxable and all the contributions during the financial year 2021-22 which are more than the prescribed limit will be taxable.
