Your PF Will Be Taxed. Check Employees Under Which Salary Bracket Will Lose Money
18 Mar, 2022 15:55 IST|Sakshi Post
Employees Provident Fund (EPF) contributions of over 2.50 lakh per year would be taxed by the Centre.
Existing PF accounts would most likely be split into two halves under the new guidelines.
New Delhi: The Centre intends to tax contributions to the Employees Provident Fund (EPF) that exceed 2.50 lakh per year. The cap for government personnel has been established at the higher end of 5 lakh rupees. From April 1, 2022, PF accounts are anticipated to be separated into two halves: taxable and non-taxable contribution accounts, under the new Income Tax (I-T) Rules.
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Here's a 10-point summary of this major story:
- This comes at a time when the EPFO, the pension fund, has cut interest rates to their lowest level in more than 40 years for the fiscal year 2021–22 (FY 22).
- The interest rate has been reduced to its lowest level since 1977-78 when it was 8%. EPFO's Central Board of Trustees is the highest-ranking decision-making body (CBT).
- I-T Regulations Threshold Limits: For example, if a non-government employee deposits 5 lakh in a PF account, 2.50 lakh would be taxed; if a government employee deposits 6 lakh in PF, only 1 lakh will be taxed. Government employees contribute to the General PF, often known as the GPF, which is a PF fund that only employees contribute to.
- The new regulations are aimed at preventing high-earners from taking advantage of government support programmes.
- The administration had previously said that the change would affect less than 1% of taxpayers.
- According to a notification issued by the Central Board of Direct Taxes, a new Section 9D has been added to the Income Tax Provisions, 1962, to impose new rules on PF income from workers' contributions exceeding 2.50 lakh per annum. The CBDT sets policies for the department of information technology.
- It further said that any contributions made until March 31, 2021, will be considered non-taxable.
- This means that donations made during the current fiscal year (April 1, 2021, to March 31, 2022) will be considered taxable.
- Non-government employers typically remove 12% of basic pay as an EPF contribution each month, then add a comparable amount and deposit it with the EPFO.
- Employees earning up to $15,000 per month in any company with more than 20 employees must have an EPF account.
