Top 5 Points For EPF Account Holders: PF Rules Explained
New Delhi: The Central Board of Direct Taxes (CBDT) has notified the rules for taxing interest earned on excess Employees' Provident Fund (EPF) or PF contributions. PF and Voluntary Provident Fund (VPF) account holders who contribute more than Rs 2.5 lakh every financial year will now have two separate EPF accounts, according to CBDT rules.
In this year's budget, Finance Minister Nirmala Sitharaman announced that PF contributions of more than Rs 2.5 lakh in a fiscal year will be taxed. The CBDT recently notified the rules in accordance with the ruling.
These CBDT regulations will go into effect on April 1, 2022.
“For the purpose of calculation of taxable interest under sub-rule (1), separate accounts within the provident fund 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,” the CBDT notification said
According to an IANS report, this means that all contributions made in PF accounts up to FY22, including contributions of up to Rs 2.5 lakh in FY22, will be placed in a single account where no tax will be levied, as has been the practise with the PF, where contribution, interest, and withdrawal are all tax free.
In FY22, however, each subscriber will have a distinct PF account where contributions exceeding Rs 2.5 lakh made in the current year and subsequent years will be deposited. According to an IANS report, this will be a taxable account, which means that any interest received on this contribution will be subject to applicable tax.
According to IANS, tax experts believe that the announcement has solved any uncertainties in the topic and rendered interest calculation more convenient.