Contributions to EPF exceeding Rs 2.5 lakh to be taxed, details here
The Centre intends to tax Employees Provident Fund (EPF) contributions that exceed Rs 2.5 lakh per year.
FollowThe Central government intends to tax Employees Provident Fund (EPF) contributions surpassing Rs 2.5 lakh yearly. The limit for government employees has been set at the higher end of Rs 5 lakh. Existing PF accounts are likely to be divided into taxable and non-taxable contribution accounts, beginning April 1, 2022, under a new set of Income Tax (IT) Rules.
Here are the highlights:
1) The new rules were introduced when the EPFO recently reduced the interest rates to the lowest in more than 40 years for the current financial year 2021-22.
2) The interest rate has been reduced to its lowest level since 1977-78 when it was 8 per cent. The EPFO is the Central Board of Trustees' highest decision-making body (CBT).
3) Threshold limits in IT Rules: For example, if a non-government employee deposits Rs 5 lakh in a PF account, Rs 2.50 lakh will be taxed. And if a government employee deposits Rs 6 lakh in a PF account, Rs 1 lakh will be subject to tax. Government employees contribute to the General Provident Fund, also known as the GPF, where only employees make PF contributions.
4) The new rules seek to prevent people with high incomes from taking advantage of government welfare programmes.
5) Earlier, the government had mentioned that the move would affect less than one per cent of taxpayers.
6) As per the notification issued by the Central Board of Direct Taxes, a new Section 9D has been added to the Income Tax Rules, 1962, to implement new rules on PF income from employees' contributions exceeding Rs 2.50 lakh per annum. The CBDT establishes policy for the department of information technology.
7) It also included that all contributions until March 31, 2021, will be treated as non-taxable contributions.
8) Contributions for the current financial year (April 1, 2021, to March 31, 2022) will be treated as taxable contributions.
9) Generally, non-government employers deduct 12 per cent of basic salary as an EPF contribution each month, adding a similar amount and depositing it with the EPFO.
10) Employees earning up to 15,000 per month in any firm with more than 20 employees must have an EPF account.
Also Read: Moody’s slashes India’s GDP forecast to 9.1% from 9.5% for 2022 amid high oil prices
Also Read: Maggi to cost more as Nestle, HUL announce price rise for major products including coffee and tea
Also Read: The Indian companies which had to delay their IPO plans
subscribe to Asianet Newsable WhatsApp channel by clicking here.For more reliable and latest news
subscribe to Asianet Newsable Telegram channel by clicking here.
