Tax contributions of more than 2.50 lakh to the taxable fund: 10 points

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:

  1. 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).

  2. 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).

  3. 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.

  4. With the new rules, the Center aims to prevent high-income people from taking advantage of government welfare schemes.

  5. Earlier, the government mentioned that the move would affect less than 1 percent of taxpayers.

  6. 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.

  7. He also mentioned that all contributions up to March 31, 2021 will be considered as taxable contributions.

  8. This means that contributions for the current year (April 1, 2021 to March 31, 2022) will be managed as taxable contributions.

  9. 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.

  10. EPF accounts are mandatory for employees earning up to Rs 15,000 per month in any company with more than 20 employees.

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