Individuals with Workers’ Provident Fund and Voluntary Provident Fund (VPF) contribution of over Rs 2.5 lakh per monetary 12 months will now have two separate PF accounts.
Finance Minister Nirmala Sitharaman had introduced, on this 12 months’s finances, that PF contribution of greater than Rs 2.5 lakh in a fiscal will likely be taxable. According to the choice, lately, the Central Board of Direct Taxes (CBDT) notified the foundations for taxation of the curiosity on the surplus EPF contributions.
“For the aim of calculation of taxable curiosity underneath sub-rule (1), separate accounts inside the provident fund account shall be maintained throughout the earlier 12 months 2021-2022 and all subsequent earlier years for taxable contribution and non-taxable contribution made by an individual,” it mentioned.
What this implies is that until FY22, all contributions made in PF accounts to date, together with contribution of upto Rs 2.5 lakh made in FY22, will likely be positioned in a single account the place no tax will likely be levied as has been the follow with the PF, the place contribution, curiosity, and withdrawal, all are tax free.
However one other PF account will likely be opened for every subscriber in FY22, the place contribution of over Rs 2.5 lakh made within the present 12 months and subsequent years will likely be positioned. This may taxable account which means curiosity earned on this contribution can be topic to relevant tax.
These guidelines will likely be efficient from April 1, 2022.
Tax specialists are of the view that the notification has ended the ambiguities within the matter and supply comfort of calculation of curiosity.
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