Wealthy PF investors may opt for debt funds as Budget changes tax rule

Budget proposes that interest on the PF contributions (employee contribution) above Rs 2.5 lakh per annum be taxable with from April 1, 2021

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Experts believe that with interest rates unlikely to soften further from here on, the possibility of debt funds fetching higher than 7 per cent returns in the near term looks difficult.

Ashley Coutinho Mumbai

4 min read Last Updated : Feb 19 2021 | 12:13 AM IST

Wealthy investors who park their spare money in voluntary provident fund (VPF) accounts may consider moving to debt mutual funds after the Union Budget’s new proposals.

Interest on provident fund (PF) was exempt from tax. The Budget proposes that interest on the PF contributions (employee contribution) above Rs 2.5 lakh per annum be taxable with from April 1, 2021.

Accordingly, the change in taxation may work against employees in higher income bracket or employees making large contribution to VPF. Assuming that basic salary is 50 per cent of the total remuneration, employees with salary of Rs 41 lakh and above

Topics : Provident Fund Debt MFs Budget 2021 EPF MF schemes EPFO National Savings Certificate