EPF New Rules: From April 1, 2022, the government has made a big change in the rules of PF account. Under this, 6 crore employees in the country may have to pay tax. Let us tell you about it.
EPF New Rules: If you work somewhere and your PF is deposited, then this news is very important for you. The government has made changes in the rules related to PF. Till now there was no tax on PF contribution or interest earned from it.
But now interest earned on contribution above Rs 2.5 lakh will come under the purview of tax. This rule will come into effect from April 1, 2022. Let us explain about it in detail.
Finance Minister announced
Let us tell you that Finance Minister Nirmala Sitharaman made an important announcement in this regard in the budget 2021. He had said that the interest received on the contribution of more than Rs 2.5 lakh in the year of the employee in the EPF will be taxed.
This rule will be applicable from 1st April. This move will affect those people who have more income and contribute more in EPF. But, the government has said that it will affect less than 1 percent of the people who contribute to the EPF.
However, there was a lot of opposition to this rule. The government also reviewed it. The Central Board of Direct Taxes (CBDT) issued a circular on August 31 last year and also informed about the new rules for tax on EPF.
Here is the new math of EPF tax
A new provision has been added to the Finance Act 2021. It said that if an employee contributes more than Rs 2.5 lakh in his provident fund in a financial year, then the interest earned on the investment above Rs 2.5 lakh will come under the purview of tax.
Simply put, if someone invests Rs 3 lakh, then the interest earned on additional Rs 50000 will be taxed. However, in the case of employees who do not have any company contribution to the Provident Fund, the limit will increase from Rs 2.5 lakh to Rs 5 lakh. At the same time, this limit for central employees will also be Rs 5 lakh.
Two types of accounts will be created
According to the new rules, now two accounts will be created in the Provident Fund. First- taxable account and second- non-taxable account.
CBDT notified Rule 9D for this, in which tax will be calculated on the interest received on the Provident Fund contribution (Tax on EPF contribution). The new Rule 9D explains how the taxable interest will be calculated. Also how to manage two accounts and what companies will have to do.
