PF Interest is now Taxable from April 1st, 2022

Deal Cadet
Inception4213

As per the new rules of EPFO, now the PF interest is taxable earned on the amount above Rs.2.5 Lakh of the PF account. The new rules will be in effect from April 1, 2022. Finance Minister ‘Nirmala Sitaraman’ had announced a new rule to make PF interest taxable which is deposited into the PF account.

Particularly if the amount deposited in the PF account is above 2.5 lakh then the interest amount is applicable for tax.

The PF account holders whose contribution is below Rs.2.5 lakh in a fiscal year, are applicable for tax under this scheme.

What Exactly The Amount Of Rs.2.5 Lakh Denotes?

Simply learn that as per EPFO rule, if you deposit the amount of more than Rs.2.5 Lakh in your PF account.

Then you are tax liable for the interest earned on the above amount only.

On the other hand, the government has provided relaxation to the employees whose employer does not contribute. For them, the amount limit is Rs.5 Lakh.

What Happens If You Have Already Deposit?

If you have Rs.5 Lakh already deposited in your account then, you are not liable for any tax deductions. This amount will be served in a non-taxable account.

But if the second deposit amount exceeds Rs.2.5 lakh then you will have to pay tax on interest earned for the exceeding amount.

Reason For EPFO Taxation Rule

Since there were no tax deductions on the amount the PF account holders deposited, they were taking advantage.

They were depositing huge amounts in crores, to their PF accounts as contributions. So that they can earn the maximum interest & also keep their money out of tax radar.

Facts Of New PF Rules:

  1. The existing PF accounts will be divided into taxable and non-taxable contribution accounts.
  2. Non-taxable accounts will also include their closing account as its date is March 31, 2021.
  3. The new PF rules can be implemented from the next financial year i.e. April 1, 2022.
  4. A new section 9D has been inserted under IT rules to introduce new tax on PF income from employee contribution above Rs. 2.5 lakh per annum.
  5. Two separate accounts will also be created in the existing PF account for calculation of taxable interest.
Expired
14 Comments  |  
12 Dimers
  • Sort By
Pro Community Angel Pro Community Angel
Link Copied

“For example, if you deposit Rs.3 Lakh in your account, then you will have to pay the tax for the interest earned on Rs.1 Lakh.’


Is this correct? 


Deal Cadet Deal Cadet
Link Copied

Sorry for the mistake

View 1 more reply
Deal Cadet Deal Cadet
Link Copied

Isn’t this old news? It was announced in last year’s budget I believe.

Benevolent Benevolent
Link Copied

Suppose you deposited 3 lakh 2022. And you paid tax on the interest for 50k at the end of 2022.

And will it be again taxable after it gets carry forwarded to 2023 ?

Follow up question: Only principal or interest amount is also taxable in 2023 ?

Super Stud Super Stud
Link Copied

Make it clear that 2.5L is the employee contribution along with VPF (not employer contribution)

Deal Cadet Deal Cadet
Link Copied

Employer contribution till 7.5L is not taxable. Employee contribution more than 2.5L is taxable.

Tech Guru Tech Guru
Link Copied

last year’s news, more than 2.5L employee’s contribution is the key aspect. The title of this thread is really misleading.

Deal Cadet Deal Cadet
Link Copied

New PF rule is going to be implemented from 1 April 2022 !! So the title is correct.

View 2 more replies
Deal Cadet Deal Cadet
Link Copied

The topic is poorly worded and has not been explained correctly. Subsequent to the new section rules has also been framed and notified which has been ignored completely. One can refer below new article for better understanding:

https://economictimes.indiatimes.com/wealth/inv...

Benevolent Benevolent
Link Copied

2.5Lac PF contribution or roughly 20833 Contribution per month 

Means around Rs173608 Base salary 

or Minimum 2083300 of yearly base salary 

Generally base salary is 40% or less even if one assume 50% as base salary then also people impacted are one earning 40LPA+

which is less than 1% of total population

our national average is around 2LPA and you are in top 10% if earning above 11.6LPA

Deal Cadet Deal Cadet
Link Copied

Now Interest is also dropped to 8.1%, implemented from current FY!

replyuser
Click here to reply
Reply