Now PF Accounts Will Be Also Taxed; Know The New Rules

On August 31, 2021, the Central Board of Direct Taxes (CBDT) had issued new rules regarding the contribution made to the Employees' Provident Fund (EPF) and the interest received from it. These rules have been implemented from the new financial year i.e. April 1, 2022, under which tax will now be charged on the PF account. This tax will be applicable on interest income and its limit will be above Rs 2.5 lakh. Interest earned on deposits above Rs 2.5 lakh in EPF account will be taxable.

According to CBDT, after the implementation of the new rule, every customer will have to maintain two separate PF accounts. The first account will be for taxable contribution and the second account will be for non-taxable contribution. With this, there will be no scope for any kind of error in the calculation of tax.

This rule is only for the amount of the employee to be deposited in PF. This rule will not apply to the amount deposited by the company in PF, that is, if an employee working in the private sector contributes five lakh rupees in a financial year to the PF account, then only 2.5 lakh out of it will be tax. The remaining 2.5 lakh rupees will not come under the tax net.

Some time back, the government had reduced the PF interest rate from 8.5 per cent to 8.1 per cent. PF interest rates were cut by 0.40 per cent. The lowest interest rate of PF is applicable in the last 40 years.