New PF Rules: According to the EPFO website, Employees’ Provident Fund Organization (EPFO) is the largest social security organization in the world.
New PF Rules: From the new financial year i.e. 1st April 2022, there is going to be a significant change in the rules related to Provident Fund (PF), which will have a direct impact on your pocket. There is a retirement savings scheme managed by the government for PF employees.
Under this, employees contribute to the fund every month. An employee investing in PF can withdraw money from the account after retirement. But if an employee wants to withdraw his money from the EPF account before retirement, then there are some necessary conditions and guidelines for this.
Tax on PF Contribution
In the budget speech for 2021-22, Finance Minister Nirmala Sitharaman had proposed that PF contributions above Rs 2.5 lakh annually would be taxable. The Central Board of Direct Taxes (CBDT) has notified new rules, which specify how interest on provident fund contribution of an employee above a certain limit will be taxed.
According to the notification issued on August 31 , contribution of more than Rs 2.5 lakh to
the Employees’ Provident Fund (EPF) will be taxed every year. For PF accounts on which the employer does not make any contribution, this limit is Rs 5 lakh per annum.
How much do employers contribute to EPF?
Employers contribute 12 per cent of basic salary and Dearness Allowance (DA) to EPF and deduct 12 per cent from the employee’s salary. 8.33 percent of the employer’s contribution goes to the Employees’ Pension Scheme (EPS), on which no interest is paid.
New PF Rules
- Existing PF accounts will be divided into taxable and non-taxable contribution accounts.
- Non-taxable accounts will also include their closing account as the date is March 31, 2021.
- The new PF rules can be implemented from the next financial year i.e. 1st April 2022.
- A new section 9D has been inserted under the IT Rules to levy a new tax on PF income.
- Two separate accounts will also be created in the existing PF account for computing taxable income.
- Till March 31, 2021, interest on non-taxable accounts is tax free. Interest on the taxable account will be taxed every year.
