The Union Finance Ministry has now notified the rules for taxing interest income on contributions made to the Employees’ Provident Fund (EPF) beyond Rs 2.5 lakh (for private sector employees) and Rs 5 lakh (for government sector employees).
- With this notification, the government has split existing Provident Fund (PF) accounts into two separate accounts in order to operationalise the new tax on PF income arising out of employee contributions exceeding Rs 2.5 lakh a year.
- Beginning this fiscal (2021-22), the government will tax interest on contributions made in excess of these limits, with separate accounts to be maintained within the provident fund account for 2021-22 and subsequent years for taxable contribution and non-taxable contribution made by an individual.
- These proposals were made in the Budget 2021-22.
- The Budget proposal had noted that the government has found instances where some employees are contributing huge amounts to these funds and are getting the benefit of tax exemption at all stages.
(Source: Indian Express)
