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New rules for PF deduction and contribution – 2022
In this blog, we will discuss the new rules for PF deduction and contribution, and their impact on employers and employees.
Index:
- Latest news update
- Important points to note
- How does it impact employers and companies?
- How does it impact employees?
Latest news update
EPFO (Employee Provident Fund Organisation) has reported that EPFO is making some new changes in the rules of the EPF. The current PF account will be divided into two parts from April 1, 2022. And In this case of a contribution in more of the limits of the employee, the interest income will be taxable.
For all the government and corporate sector employees, the income tax department will start imposing taxes on PF returns from April 1, 2022. The CBDT (Central Board of Direct Tax) will start to execute the income tax 25th Amendment rule in April, which will apply for both the EPF and GPF (General Provident Fund) under the purview of this rule.
Finance Minister Nirmala Sitharaman during her budget 2022 speech mentioned that the interest on contribution towards the EPF account (Provident Fund) of over Rs 2.5 lakh p.a will be taxable from 1 April 2022. On the other hand for government employees, the limit of tax-free contribution to GPF is Rs 5 Lakh P.a.
As per the Central Board of Direct Tax, the tax will be levied on the salary of employees, if a corporate sector employee or a government employee was contributing above the limit, then the interest income will be assessed as income, and then the income tax will be deducted, and it deduction will come under the form 16.
Till FY22, all contributions made in the PF account so far, including contributions of up to Rs 2.5 lakhs made in FY22, will become in one account where no tax will be imposed as has been the practice with the PF, where contribution, interest, and withdrawal, all are tax-free. But another PF account will be created for each subscriber in FY22, where the contributions of over Rs 2.5 lakh made in the current year and following years will be placed. That will be a taxable account means interest earned on this contribution will be subject to applicable tax.
Facts of New PF Rules:
- The present PF accounts will be divided into taxable and non-taxable contribution accounts.
- Non-taxable accounts will also include their closing account as it is March 31, 2021.
- New PF rules will be implemented from the next financial year on April 1, 2022.
- A new section 9D has been included under IT rules to introduce the new tax on PF (Provident Fund) income from employee contributions above Rs. 2.5 lakhs per annum.
- These two separate accounts will also be created in the existing PF account for the calculation of taxable interest.
How does it impact employers and companies?
It will impact the employers and companies in terms of:
- As you know, EPF is managed by the EPFO and General Provident Fund (GPF), where government employees are saving for retirement.
- Many big companies in India handle the retirement savings of their employees through ‘’EPF Trust’’ to ensure that their employees don’t have to run behind any process to avail these savings at the time of retirement/need.
- Employers will have to create a separate return for the employee with more than 5L contribution and update to the dept.
How does it impact employees?
The new rules for PF deduction are impacting the employees are:
- The annual contribution limit will be Rs 2.5 lakh will apply for EPF members when PF and GPF where there is no contribution from the employer, the being has been set at Rs 5 lakh.
- EPF accounts are mandatory for employees earning up to Rs 15,000 in a month in companies with over 20 workers, with 12% of the basic salary deducted as employee’s contribution and another remitted by the employers.
- This step will impact the high-income earners and HNIs (High Net-worth Individuals). Any person who earns more than Rs 20.83 lakh a year will attract his interest on EPF contribution access tax.
- And the salary employees who use the Voluntary Provident Fund to invest more than the compulsory 12% of basic salary will also be impacted.
So, we have come to the end of our discussion of new rules for PF deduction and its impacts.
Related posts:
PF ESI deduction rules
A guide to Payroll Process
EPF Rate of interest 2021-2022
If you have any queries or confusion kindly drop us the comment in the comment box.
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60 Comments
Reply
Vishal N B says:
September 28, 2023 at 9:32 am
My basic salary is Rs.40,000 and HRA and other benefits are extra. My employer submits PF contribution as 12% or 15000, i.e. 1800 per month. Ideally it should be 12% of 40,000. When I asked, they said as per rule minimum payment should be 12% of 15000 and that they are paying. Seek your guidance.
Saral PayPack says:
November 6, 2023 at 12:41 pm
Yes, it is 12% of actual or 15000. If you want to contribute more, check with your employer for the same. so your contribution can be 12% on 40000 but your employer will still contribue 12% of 15000
Reply
Sanjeev Mahajani says:
September 13, 2023 at 9:19 am
Presently our institute has 21 staff for which the EPF is deducted. If 4 staff is resigning from the institute, shall we stop deducting the EPF for remaining staff? Because the total number of staff will be less than 20.
Team Saral says:
September 19, 2023 at 11:46 am
NO. You have to continue the PF process.
Reply
Anil Choubey says:
June 7, 2023 at 11:59 am
I have given my resignation letter to my company earlier two months ago due to illness but yet I have not received full and final amount from EPFO account tell me what to do
Reply
VINOD says:
April 22, 2023 at 3:46 pm
My salary in the earlier company was Rs, 14000/- and i was covered under EPF and paying the contribution. Now I have changed the employment and my current salary is
Rs, 20000/-
I have already fully withdrawn the PF acumulations of the earlier employment.
Does I need to pay the PF for the present employment?.
Please clarifysaralpaypack says:
May 29, 2023 at 5:01 pm
Yes, you are required to be covered under PF contribution
Reply
Harish says:
April 17, 2023 at 4:38 pm
Post retirement and with gap of two years ,if once again new job is taken,and pf is deducted on basic salary of 25000/- which is lower than last drawn basic at the retirement time,whether such pf contribution shall help retired employees to save income tax on pf interest on accumulated balance since he has again started contributing pf though much smaller basic
Reply
Rajesh Juneja says:
March 28, 2023 at 11:20 pm
15050 par company prf nahi kati hai
Reply
Minakshi says:
February 15, 2023 at 4:30 pm
My gross salary is 23259 and in-hand salary is 21600,what my pf contribution.company says that a new came into existence from January 2023 that all contribution to pf account will be only from employee…employers/company has no contribution in EPF account..is that true…plz guide me…thank you
saralpaypack says:
February 22, 2023 at 3:34 pm
NO such rules have come
Reply
Santhosh d b says:
January 12, 2023 at 7:15 pm
As my salary is 18000 per monthly is eligible for pf or how and other scheme is applicable for my salary in Indian government as I am working in Pharmacy college.
saralpaypack says:
January 25, 2023 at 5:56 pm
Your are eligible for PF provided your employer is registered under EPFO. Also you are eligible for ESI benefit
Reply
vidya says:
November 22, 2022 at 3:30 pm
my company established in 2002 but pf deduct from 2006 for few employees only.now 2022 still same members are having PF in my company. now the situation is increase company strength so remaining employees are asking pf and esi.
if i raise the question my management they getting feared to face the PF staff and enroll pf for new employees.
what will i do.i need to apply pf for all employees in my company.saralpaypack says:
December 1, 2022 at 11:09 am
As the company is already registered under PF, you can enroll the others at any time. This will not create an issues.
Reply
संजय पांडेय says:
November 19, 2022 at 8:17 pm
इस कटौती का सेवा निवृत्ति के बाद या कर्मचारी की सेवा के दौरान मृत्यु के बाद मिलने वाली पेंशन पर क्या प्रभाव होगा ?
कृपया मार्गदर्शन करेंsaralpaypack says:
December 1, 2022 at 11:10 am
This will not have any impact on the PEnsion
Reply
Anil says:
November 19, 2022 at 7:15 pm
My name is Anil, my basic is 61000 Pm. My is employer is showing wage as 15000 Pm only in EPF and deducting Rs 1800 as EPF from my salary. Is this correct. To compensate this i am opting for a VPF of Rs 14000 PM So PF+ VPF is Rs 15800 Pm. Will this creat a problem when withdrawing my amount after 5 years
saralpaypack says:
December 1, 2022 at 11:10 am
HI, Your employer is correct. Also, you will not have any issue in withdrawal as your PF and VPF both are created to a single account
Reply
Tamanna Chatterjee says:
November 2, 2022 at 7:52 am
Hi ,My name is Tamanna, my in hand salary is 10,437,now company was demand,they deduct our inhand salary and transfer the pf account, is this rules
saralpaypack says:
November 2, 2022 at 12:26 pm
PF employee contribution will be deducted from the gross salary itself
Reply
ASHU GUPTA says:
October 18, 2022 at 11:25 am
my name is ashu gupta
i am working in private school from 20 years
my salary is 15000 and deposit epf regulary
this epf account has related with chandigarh epfo account
before two years i have joined max bupa life insurance as commission agent but company has create new epfo account related with jalandhar epf office i have done no business and business is zero company show my attendance june to oct 2020. no deposit and any money in epf account
i am facing problem about 2nd epf account
I am not withdrawn money from school epf regular account from two years
kindly send me solutations this matter
mobile no 9855552291,991442020 i will pay money for solve this mattersaralpaypack says:
November 2, 2022 at 12:29 pm
Please contact the epfo office or any PF consultant.
Reply
Akash says:
October 4, 2022 at 10:02 am
In our company,Company contribution and employeer contribution both deduction are done from employer salry only is this valid.
Khan says:
October 20, 2022 at 12:54 pm
15000 hzaar se upar selry pe company jma nhi kregi kya pf aesa to koi niyam nhi bna hai abi
saralpaypack says:
November 2, 2022 at 12:28 pm
For a new PF account where Salary is above 15000, PF contribution is optional
saralpaypack says:
November 2, 2022 at 12:32 pm
Yes, it will be a part of the CTC.
I worked for my first company(first job) for 2 years and my PF was deducted. I resigned from there and withdrew the whole PF+pension amount due to urgent need. I joined my second company where my basic salary was 15500 and HR told that I can opt out of the PF deduction, so there was no PF deduction. I have been in this company for six years now, so will this create any problem if I switch to another company which is deducting PF? my current basic is 34000.
saralpaypack says:
September 22, 2022 at 10:08 am
NO, there will not be any problem due to this
Reply
Shambu says:
September 12, 2022 at 11:51 pm
I want to withdraw less than 50,000 from my total PF amount ( more than 1 lakh) under the reason medical illness with PAN card submission. could u pls tell me whether TDS will attract to my less than 50,000 withdrawal ? if yes then how much ?
saralpaypack says:
September 14, 2022 at 12:35 pm
NO, TDS is not applicable for Partial withdrawal
Reply
Pankaj Kumar says:
August 25, 2022 at 9:35 am
Currently my PF deduction is 12% of 15000, which is lower than the my Basic. Can I opt to deduct the PF on my total basic in mid of the Financial year.
saralpaypack says:
August 30, 2022 at 3:06 pm
Yes, you can. Please check with your employer.
is it minimum 1800 or whichever is higher 12% of basic and 1800?
saralpaypack says:
August 9, 2022 at 10:30 am
Its 12% on Actual earning (excluding HRA) or 12% on 15000, as opted.
Reply
srinivas says:
August 1, 2022 at 7:55 pm
is PF contribution is compulsory for every employee if he is earning more than 50,000 per month
saralpaypack says:
August 9, 2022 at 10:28 am
If it is the first employment then not mandatory (optional) else it is mandatory
sushil says:
August 10, 2022 at 11:27 pm
meri salary 8000 pm hai main private security guard hoon mujhe pf katwana jaroori hai kya
saralpaypack says:
August 30, 2022 at 3:08 pm
If your employer is applicable under PF, then PF will be applicable to you.
Reply
Daphne Kalekar says:
July 28, 2022 at 12:47 pm
If basic salary is less than 15000/- will Rs 1800/- (12%of 15000/-) be deducted from employee every month.
saralpaypack says:
July 29, 2022 at 2:47 pm
No, 12% on actual salary will be deducted
Reply
mohd imran says:
July 22, 2022 at 10:42 am
Dear Sir,
I Working In Automobile Sector since 6 years My Salary has Increased to 30 thousand , earlier my pf was deducted , now even after 30,000 i can get my PF deducted.saralpaypack says:
July 29, 2022 at 2:47 pm
Yes, the PF is applicable for you.
Reply
sreekumar says:
July 12, 2022 at 10:10 am
i have 12lakh in my epf account and i resigned from my job. can i withdraw full amount and will it deduct tax ? for withdraw full amount including pension amount , which form has to be filled and give to department?
saralpaypack says:
July 15, 2022 at 3:25 pm
If you have completed 5 yrs service, then the amount is not taxable else it is taxable. But your PAN should have been verified in your UAN Login. You can withdraw the whole amount including pension only if you have less than 10 yrs of service. After 10 yrs the pension amount cannot be withdrawn. To withdraw online claim of form 19 has to be raised from your UAN login
Reply
Anil Choudhari says:
July 11, 2022 at 11:14 pm
How much PF deduction should be for gross salary 49600 / month. For partnership firm as per govt rule.
saralpaypack says:
July 15, 2022 at 3:25 pm
The gross salary for PF is (Gross Salary – HRA). YOu can calculate it as (Salary *12%) or restrict it to 1800 which is 12% of 15000 when saalry is exceeding 15000
Reply
Sandeept says:
July 1, 2022 at 11:58 pm
Can I reduce my and employer contribution to 1800 a month from current 10000 a month.
saralpaypack says:
July 7, 2022 at 3:50 pm
yes that can be done
Reply
S BALAKRISHNAN says:
June 20, 2022 at 3:27 pm
above 10 years of pensionable service, we dont want pension and could we withdraw all pension amount or not?
saralpaypack says:
June 30, 2022 at 3:44 pm
No, we cannot withdraw.
Reply
Kishore says:
June 15, 2022 at 6:12 am
My employee salary is 50000.my basic is 25000 , my hra is 10000 , my conveyance is 1600 and other allowance is 13400.is this gud salary breakup?
And
Iam calculating pf on only basic pay i e 25000 for employee and employeer cap is restricted for 1800 only.is it ok or is it legal ?saralpaypack says:
June 30, 2022 at 3:45 pm
Yes, it is a good breakup of salary as 50% of the salary is under basic. Restriction at 1800 is as per PF rules.
PF deduction calculations are always a big confusion among employees. This article well explains the details on deductions done. Thank you for the much needed content.
Reply
girdhar gupta says:
June 9, 2022 at 6:39 pm
sir
kya pvt limited company main koi naya employee aata hai toh uska pf deducted karna company kee responsibility hai yaa nahin salary agar 25000/- p.m. ha kya company pe rule lagu hota hai ya nahin ya company kee apni iccha hai woh deduct kare yaa naa karesaralpaypack says:
June 30, 2022 at 3:46 pm
If the company strength is more that 20 then Compnay registartion is mandatory for PF, but if the employee salary is more 15000 pm and it is the first employment then company has the choice of deducting PF
Reply
Neena says:
June 2, 2022 at 3:41 pm
I am a teacher in private school under CBSE. My EPF contribution by my school is 1800/-pm, My basic according to 7th pay commission is 63500. I know it is not 12 percent of my basic. Can you help me in this matter.
saralpaypack says:
June 2, 2022 at 5:08 pm
EPF contribution is 12% of Basic pay or 12% of 15000 (Threshold limit for PF) whichever the employer takes up.
Reply
Sudarshan Rane says:
May 10, 2022 at 11:38 pm
If basic salary is more than 15000, as per new salary structure. Ctc s 50% basic. Then basic is higher than 15000 then company not ready to deduct pf of employee. Please help us in such situation as per new codes of wages PF Gratuity is compulsory. Then why companies denied it
saralpaypack says:
May 23, 2022 at 5:14 pm
PF deduction for employees above 15000 is not mandatory. Gratutity is applicable by default when an employee has served for more than 5 years in the company
