Curiosity on EPF Contributions above Rs 2.5 lakh Taxable

The Indian Finance Minister has tabled as we speak, the Union Basic Price range 2021-22 within the Parliament. 

One of many key amendments within the Finance Invoice 2021 is expounded to EPF and VPF (Provident Fund) contributions.

As of now (FY 2020-21), the curiosity earnings earned on contributions to EPF made by the worker is totally TAX-FREE.

Nevertheless, with efficient from 1st April, 2021, no extra tax free curiosity on greater than Rs 2.5 lakh a yr contribution in direction of EPF/VPF (solely worker contribution).

This restrict doesn’t embrace the employer’s contribution. The brand new guidelines may also apply to the GPF (Basic Provident Fund).

EPF provident fund latest epf withdrawal rules

Curiosity on EPF Contributions above Rs 2.5 lakh is Taxable

EPF Contributions above Rs 2.5 lakh vpf epf interest taxable provident fund budget 2021 pic
EPF Contributions above Rs 2.5 lakh, Curiosity is taxable | Price range 2021

From 1st April 2021 onwards, the curiosity on any contribution above Rs. 2.5 lakh by an worker to a acknowledged provident fund is taxable as per the provisions of the Finance invoice 2021.

  • If worker contribution is greater than Rs 2.5 lakh, the curiosity earned on the surplus quantity is taxable wef 1st April 2021 onwards.
  • Your previous EPF steadiness as on March 31, 2021 will all the time stay tax free.
  • Instance – If worker share EPF + VPF is Rs 4.5 lakh in FY 2021-22 then the curiosity earned on extra Rs 2 lakh (Rs 4.5 L – Rs 2.5 L) will probably be taxable in FY 2021-22 / AY 2021-22.
  • You’ll then want to find out the curiosity quantity equivalent to the surplus, that’s Rs. 2 lakh and declare it as earnings and pay tax as per relevant earnings tax slab fee.
  • Notice that the extra curiosity on this quantity (Rs 2 lakh) in subsequent evaluation years is probably not taxable. (Let’s anticipate extra readability on this facet)

This new rule will impression the salaried people who make giant contributions to EPF or VPF account.

Newest Information (23-March-2021) : The Central Govt has capped the brink restrict to Rs 5 Lakh for incomes tax-free curiosity on staff contribution to PF. Nevertheless, it’s meant just for Protection Personnel and few different Govt staff the place employer is just not contributing into EPF.

The earlier Price range 2020 has restricted the tax-exempt superannuation, NPS and EPF account contribution by the employer to most of Rs 7.5 lakh in a monetary yr. Additional, any curiosity or good points earned from the surplus contribution is be taxable within the palms of an worker. This modification is relevant for FY 2020-21 (AY 2021-22) itself.

Newest information (March 2021) : EPF rate of interest for 2020-21. The Central Board recommends 8.50 % fee of curiosity to its subscribers for the yr 2020-21. EPFO notifies 8.5% as curiosity Fee on EPF for the yr 2020-21.

The earlier FYs EPF rates of interest are as beneath;

  • FY 2019-20 : 8.50%
  • FY 2018-19 : 8.65%
  • FY 2017-18 : 8.55%
  • FY 2016-17 : 8.65%
  • FY 2015-16 : 8.80%
  • FY 2014-15 : 8.75%
  • FY 2013-14 : 8.75%
  • FY 2012-13 : 8.50%

Proceed studying:

  1. 15 Essential Price range 2021 Proposals associated to your Private Finance | W.e.f AY 2022-23
  2. EPF Curiosity Revenue & Withdrawals | Tax Implications | Is EPF Curiosity taxable?
  3. Why do you have to Withdraw Outdated EPF Account Stability? | In-operative EPF A/c Timeline
  4. EPF a/c curiosity calculation : Elements & illustration (Staff’ Provident Fund)

(Put up first printed on : 01-February-2021)