Provident Fund alert! PF a/c to be split into two from April 1: Here are 5 big points | Personal Finance News

New Delhi: Budget Minister Nirmala Sitharaman has announced in the 2021 budget, that a PF contribution of more than Rs 2.5 lakh in one budget will be taxable. In line with the decision, recently, the Central Board of Taxes Taxes (CBDT) also last year considered the rules for interest tax on excessive EPF payments.

For the purposes of calculating the tax liability under subsection (1), separate documents within the supplier’s expense account will be maintained during the previous year 2021-2022 and all subsequent years for tax deduction and non-tax contribution made by people, ”he said.

Here are five great areas you need to know

1. Participants of the Employee Provider Fund and Voluntary Provider Fund (VPF) who have a PF contribution of over Rs 2.5 lakh per fiscal year will now have two separate PF accounts. These rules will take effect from April 1, 2022.

2. What this means is that as far as FY22, all donations made in PF accounts so far, including contributions of Rs 2.5 lakh made in FY22, will be transferred to an account where no to the tax that will be received as it pertains to the PF. , where contributions, benefits, and withdrawals, are all tax-free.

3. But another PF account will be opened for individual subscribers at FY22, where the contribution of over Rs 2.5 lakh made in the coming year and next years will be raised. This will be a tax account, meaning the interest you receive on this contribution will be subject to applicable tax.

4. Tax experts believe that this decision is aimed at stopping the total cost of individuals from misusing an assistive device and earning non-taxable income unfairly in ensuring interest return. The interest rate is calculated on a year-to-year basis according to the bank interest.

5. Taxpayers will need to add annual income from contributions past Rs 2.5 lakhs into their PF accounts while publishing their returns.

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