Under the new rules, existing PF accounts will be split into two parts.
New Delhi:
The center plans to tax the contributions of the Employee Prevention Fund (EPF) over 2.50 lakh per year. For government employees, the limit has been set at a higher limit of 5 lakhs. Under the new Income Tax (IT) Rules, it is likely that existing PF accounts will be split into two parts: taxable and taxable accounts as of April 1, 2022.
Here’s your 10-point scam for this great story:
-
This is at a time when the EPFO has reduced interest rates to an all-time low for more than 40 years for the current fiscal year 2021-22 (FY 22).
-
The reduction marks the lowest interest rate since 1977-78, when the figure was 8%. The EPFO is the main decision-making body of the Central Board of Trustees (CBT).
-
Threshold limits according to IT rules: For example, a non-government employee puts Rs 5 lakh into PF account, Rs 2.50 lakh will be taxed; and if a government employee puts Rs 6 lakh in PF, he will pay Rs 1 lakh tax. Government employees contribute to the General PF or GPF, where only PF employees make contributions.
-
With the new rules, the Center aims to prevent high-income people from taking advantage of government welfare schemes.
-
Earlier, the government mentioned that the move would affect less than 1 percent of taxpayers.
-
In order to establish new rules on PF income from employee contributions of more than 2.50 lakh per year, a new section 9D has been introduced in the Income Tax Regulations, 1962, according to a notification issued by the Central Direct Tax Commission. CBDT sets the policy for the IT department.
-
He also mentioned that all contributions up to March 31, 2021 will be considered as taxable contributions.
-
This means that contributions for the current year (April 1, 2021 to March 31, 2022) will be managed as taxable contributions.
-
Typically, non-governmental employers deduct 12 percent of their basic salary each month as an EPF contribution, while adding a similar figure to their deposit in the EPFO.
-
EPF accounts are mandatory for employees earning up to Rs 15,000 per month in any company with more than 20 employees.
