New Delhi: Come April 1, 2022, the curiosity earned on the provident fund stability is not going to be exempted from tax. The brand new PF rule will kick in amid Workers Provident Fund Organisation (EPFO) saying 8.1 per cent rate of interest on worker provident fund (EPF) accumulations in members’ accounts for the 2021-22 fiscal, down from 8.5 per cent within the earlier yr.
This comes as one other blow to PF subcribers as a result of curiosity accrued on EPF contribution past a selected threshold will probably be taxable, in keeping with the announcement in 2021 Price range.
Earlier, curiosity on EPF was completely tax-free previous to Price range 2021. Finance minister Nirmala Sitharaman has proposed that PF funds of extra past Rs 2.5 lakh per yr be taxed.
On this regard, the Central Board of Direct Taxes (CBDT) final yr issued tips sharing particulars of how the curiosity on an worker’s provident fund contribution that exceeds a selected degree will probably be taxed.
The CBDT notification has clarified that these guidelines will come into impact from April 1, 2022, in keeping with the Financial Instances report. It’s to be famous that tax on the curiosity earned on extra contributions in FY 2021-22 will probably be payable and it must be declared within the subsequent yr earnings tax return submitting.
Which means that contributions for the present monetary yr (April 1, 2021, to March 31, 2022) will probably be seen as taxable contributions.
In an effort to perform calculation, separate accounts inside the provident fund account shall be maintained beginning 2021-2022 and all subsequent years for taxable contribution and non-taxable contribution made by an individual.
Additionally, word that the Rs 2.5 lakh threshold is relevant for non-government staff whereas it’s Rs 5 lakh within the case of presidency staff. Which means that curiosity will probably be taxable if contributions to EPF and VPF exceed Rs 5 lakh in an FY.