Money

Key things to know about new tax rules

From 1 April, the curiosity on provident fund (PF) contributions of staff throughout India underneath a sure bracket will likely be taxed. The central authorities will tax curiosity on EPF contributions above 2.5 lakh yearly.

Here are key things to know about the new PF tax rule

Any curiosity credited to the provident fund account of an worker will likely be tax-free just for contributions up to 2.5 lakh each year and any curiosity on an worker’s contribution over 2.5 lakh shall be taxed within the palms of the worker year after year.

The new PF rules will largely affect the high-income earners. It is probably going that in future the tax profit could also be step by step withdrawn to tax at the least one a part of the EEE regime,” in accordance to Vikas Vasal, National Managing Partner, Tax at Grant Thornton Bharat.

Employees can take coronary heart from the truth that the curiosity on extra contribution which is able to develop into taxable and never the contribution itself.

“The excess contribution can not be taxed as the contribution is made by the employee from his salary which already gets taxed. In case the employer does not contribute to the provident fund of the employee then the threshold applicable will be 5 lakh of employee’s contribution,” stated Tax Expert Balwant Jain.

The employer contributes 12% of fundamental wage plus dearness allowance to EPF and deducts one other 12% from the worker’s wage; 8.33% of the employer contribution goes to Employees Pension Scheme (EPS).

For the implementation of new rules, a new Section 9D has been included underneath the Income Tax Rules, 1962, in accordance to a notification issued by the Central Board of Direct Taxes. The CBDT frames coverage for the I-T division.

PF accounts are necessary for workers incomes up to 15,000 per thirty days in any agency with over 20 staff. The EPFO, earlier this month, determined to decrease the curiosity rate to a four-decade low of 8.1% for 2021-22.

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