EPFO rule change: The Central Board of Direct Taxes (CBDT) has issued new rules regarding the contribution made to the Provident Fund (PF) and the interest earned from it. In this, all the things related to interest rate to tax are related. Let us understand the whole thing in 10 points.
EPF is the most important financial planning and retirement investment option of millions of employees. EPF is a better investment option for assured returns and tax benefits. In such a situation, please inform that there has been a change in the rules of Employee Provident Fund from April 1. According to this rule, the contribution in PF more than a limit will be taxed. Under the new rule, if the total contribution in PF in a financial year exceeds Rs 2.50 lakh, then it will be taxed. Let us know about it in detail.
Some rules have changed from April 1,
according to the new rule of EPF, if the employee has more than Rs 2.5 lakh deposited in PF in a financial year, then it will be taxed. This rule is only for the account of the employee who is deposited in PF. This rule will not apply to the amount deposited by the company in your PF.
Know the special things related to it
- The EPFO has reduced the interest rate for the financial year 2021-22 to a four-decade low of 8.1 percent.
- Any interest on contribution made to EPF of an employee remains tax-free only for contributions up to Rs 2.5 lakh per annum.
- Interest is charged to tax on contributions from the employee in excess of Rs 2.5 lakh per annum.
- If an employer is not contributing to the EPF of an employee, the contribution limit has been increased to Rs 5 lakh.
- Only additional contributions above the threshold are taxed, not the total contribution.
- The additional contribution and the interest earned thereon will be kept in a separate account with EPFO.
- Employer’s contribution to Provident Fund (PF), NPS and retirement aggregating Rs 7.5 lakh per annum is exempt from taxes.
- Since employers will withhold tax at source, all your details have to be filled in Form 16 and Form 12BA.
- Employers will have to mandatorily make EPF contribution for those employees whose monthly income is up to Rs 15,000.
- Taxes withheld in this way need to be reported by employees as “income from other sources.”
