EPFO: Are you a PF client? But these things must be known. It is a known fact that interest earned from EPF till now is tax deductible …
EPFO: Are you a PF client? But these things must be known. It is a known fact that interest earned from EPF is tax deductible till date. However, these rules will be changed from April. Union Finance Minister Nirmala Sitharaman announced at a recent budget session of Parliament that those who deposit more than Rs 2.5 lakh a year in the EPF will have to pay tax on the interest paid to them. In her budget speech, Nirmala Sitharaman made it clear that if the PF contribution exceeds Rs 2.5 lakh per annum, the tax will have to be paid. However, this tax will be calculated only on the amount deposited by the employees. It will come into effect from April 1, 2021.
If the employee’s share in the PF is up to Rs 2.5 lakh per annum, the exemption will be available as usual under 80C. If the PF employee’s share is more than Rs 2.5 lakh, the interest is taxable. In addition to the employee in the PF, the company he works for also makes some deposits on behalf of the employee. However, certain rules do not apply to this amount. Only employee share is taxable. This tax is calculated according to the employee income tax tax slab.
The percentage of tax that the employee is entitled to is taxable. If an employee falls under the 30 per cent tax slab, he will have to pay 30 per cent in the form of tax. However, if you deposit less than Rs 2.5 lakh in PF, you will not have to pay any tax. As such they have no need to worry about the new tax. The Finance Ministry will soon issue guidelines on this.
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