EPF accounts: Key things to know about new tax rules    (2024)

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

Any interest credited to the provident fund account of an employee will be tax-free only for contributions up to 2.5 lakh every year and any interest on an employee's contribution over 2.5 lakh shall be taxed in the hands of the employee year after year.

The new PF rules will mostly impact the high-income earners. It is likely that in future the tax benefit may be gradually withdrawn to tax at least one part of the EEE regime," according to Vikas Vasal, National Managing Partner, Tax at Grant Thornton Bharat.

Employees can take heart from the fact that the interest on excess contribution which will become taxable and not 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," said Tax Expert Balwant Jain.

The employer contributes 12% of basic salary plus dearness allowance to EPF and deducts another 12% from the employee’s salary; 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 under the Income Tax Rules, 1962, according to a notification issued by the Central Board of Direct Taxes. The CBDT frames policy for the I-T department.

PF accounts are mandatory for employees earning up to ₹ 15,000 per month in any firm with over 20 workers. The EPFO, earlier this month, decided to lower the interest rate to a four-decade low of 8.1% for 2021-22.

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Published: 06 Apr 2022, 09:57 PM IST