In the budget for the year 2021, Finance Minister Nirmala Sitharaman had said that the interest received by those whose annual contribution in EPF and VPF is more than Rs 2.5 lakh will be taxed. CBDT has issued a notification regarding this.
The Central Board of Direct Taxes (CBDT) has issued a new rule for calculation of tax on the interest of EPF deposits. This is for the contribution of more than 2.5 lakh rupees annually in EPF. A separate account will be opened within the Provident Fund account for computing the taxable interest under the new provision.
In the budget for the year 2021, Finance Minister Nirmala Sitharaman had said that the interest received by those whose annual contribution in EPF and VPF is more than Rs 2.5 lakh will be taxed. The Central Board of Direct Taxes or CBDT has issued a notification in this regard on August 31 this year.
Contribution up to
March 31, 2021 will remain non-taxable Any contribution made by an individual to EPF till March 31, 2021 will remain non-taxable. After the financial year 2020-21, the calculation of interest on these two EPF accounts will be different. These two accounts will be created within the Provident Fund for the financial year 2021-22 and subsequent financial years.
CTBT has said that this rule will be effective from April 1, 2022. In the financial year 2021-22, if more than Rs 2.5 lakh is deposited in the PF account, then tax will have to be paid on the interest received on it.
This rule from 1 April 2022
The Central Board of Direct Taxes (CBDT) has said that these rules will come into existence from April 1, 2022. In the financial year 2021-22, if you have more than ₹ 2.5 lakh deposited in your PF account, then you will have to pay tax on the interest you get. You will also have to mention this in the income tax return filing of the next year. This limit of 2.5 lakh rupees every year in PF account is for private employees.
Separate limit for government employees
If you are a government employee, then this limit of contribution to EPF and VPF is five lakh rupees. If the amount deposited in the EPF and VPF accounts of a government servant exceeds Rs 5 lakh annually, then they will have to pay tax on its interest. The Central Board of Direct Taxes has said in this notification that in the financial year 2021-22, only if the contribution of more than ₹ 2.5 lakh in the PF account is made by the staff, tax will have to be paid on its interest.
