The government has decided to reduce the tax benefits on PF, in a move to target high-income earners who benefit from the scheme.
High-income earners with over Rs 2.5 lakh per year towards their Employees’ Provident Fund (EPF) are liable to pay taxes on interest incomes if contributions are made over this amount. The government in Union Budget 2021 announced that it would reduce tax benefits for high-income earners who benefit from the EEE scheme.
How to clean up Gmail by deleting emails in bulk in 2022?
EEE or Exempt-Exempt-Exempt tax category allows all investments falling under this category completely tax free. The EEE grouped investments are governed by different sections of the Income Tax Act of 1961.
But the government had brought amendments to the tax benefits available to employers and employees for contributions to the EPF. From April 1, 2022, provident fund accounts have been divided into taxable and non-taxable accounts.
Under Budget 2021, the government has decided to reduce the tax benefits to target high-income earners who benefit from the EEE scheme.
Points you need to know about EPF( Employee Provident Fund):
7 Healthy Habits To Sleep Better-proven tips
- Any interest on contributions made towards EPF of an employee only remains tax-free for contributions of up to ₹ 2.5 lakh a year.
- Interest on contributions of over ₹ 2.5 lakh is taxed from the employee yearly.
- The contribution threshold is increased to ₹ 5 lakh if an employer is not contributing towards the EPF of an employee.
- Only the excess contribution above the threshold is taxed, not the total contribution itself.
- The excess contributions and interest accrued on it will be maintained in a separate account with the EPFO.
- Employer’s contribution to Provident Fund (PF), NPS, and superannuation aggregating to a total sum of ₹ 7.5 lakh a year is exempt from taxes.
- Since employers will withhold taxes based on accruals, these details must be filled in Form 16 and Form 12BA.
- Employers must mandatorily provide EPF contributions for employees whose monthly income is up to ₹ 15,000.
- Taxes withheld in such a manner need to be reported by employees as “Income from other sources.”
- The EPFO has reduced the interest rate to a four-decade low of 8.1 percent for FY 2021-22.
How to Download iOS 16 Public Beta on iPhone?
TOP 10 COOLEST AI-BASED GADGETS FOR YOU TO USE IN THIS YEAR
2022 India’s Most Beautiful Lake Cities and Cities to Travel-enjoy & capture best time
