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EPF contribution of over Rs 2.5 lakh now requires 2 PF accounts

The rules will be effective from April 1, 2022.

Topics
EPF | Provident Fund | pension

IANS  |  New Delhi 

EPF

People with Employees' and Voluntary (VPF) contribution of over Rs 2.5 lakh per financial year will now have two separate accounts.

Finance Minister Nirmala Sitharaman had announced, in this year's budget, that contribution of more than Rs 2.5 lakh in a fiscal will be taxable. In line with the decision, recently, the Central Board of Direct Taxes (CBDT) notified the rules for taxation of the interest on the excess contributions.

"For the purpose of calculation of taxable interest under sub-rule (1), separate accounts within the account shall be maintained during the previous year 2021-2022 and all subsequent previous years for taxable contribution and non-taxable contribution made by a person," it said.

What this means is that till FY22, all contributions made in accounts so far, including contribution of upto Rs 2.5 lakh made in FY22, will be placed in one account where no tax will be levied as has been the practice with the PF, where contribution, interest, and withdrawal, all are tax free.

But another PF account will be opened for each subscriber in FY22, where contribution of over Rs 2.5 lakh made in the current year and subsequent years will be placed. This will taxable account meaning interest earned on this contribution would be subject to applicable tax.

These rules will be effective from April 1, 2022.

Tax experts are of the view that the notification has ended the ambiguities in the matter and provide convenience of calculation of interest.

--IANS

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(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Sun, September 05 2021. 17:19 IST
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