Folks with Workers’ Provident Fund and Voluntary Provident Fund (VPF) contribution of over Rs 2.5 lakh per monetary yr will now have two separate PF accounts.
Finance Minister Nirmala Sitharaman had introduced, on this yr’s finances, that PF contribution of greater than Rs 2.5 lakh in a fiscal will probably be taxable. Consistent with the choice, not too long ago, the Central Board of Direct Taxes (CBDT) notified the principles for taxation of the curiosity on the surplus EPF contributions.
“For the aim of calculation of taxable curiosity beneath sub-rule (1), separate accounts throughout the provident fund account shall be maintained through the earlier yr 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 probably be positioned in a single account the place no tax will probably 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 probably be opened for every subscriber in FY22, the place contribution of over Rs 2.5 lakh made within the present yr and subsequent years will probably be positioned. It will taxable account that means curiosity earned on this contribution could be topic to relevant tax.
These guidelines will probably be efficient from April 1, 2022.
Tax consultants are of the view that the notification has ended the ambiguities within the matter and supply comfort of calculation of curiosity.