Thursday, February 22, 2024

There has been a significant change in EPF laws; today, employees will have two PF accounts, and you should know why

Update on PF Accounts: In the budget, there was a mention of a tax on EPF interest received. However, it remained unclear how this tax would be implemented. By releasing a notification, the Income Tax Department has now clarified the tax picture.

There is some very crucial news for those who are employed. The rules of the Employees’ Provident Fund have changed dramatically (EPF). From the financial year 2021-22, if a person’s EPF contribution exceeds Rs 2.5 lakh in a financial year, he will be required to keep two separate PF accounts. The Central Board of Direct Taxes (CBDT) has also released a statement on the subject.

You must now maintain a PF account.

The present provident fund accounts (PF accounts) would be separated into two separate accounts, according to the statement. To calculate the tax on the interest gained on the money deposited in the PF account, a separate PF account will be formed. According to the CBDT statement, no tax will be charged on any donation until March 31, 2021, although interest on PF accounts will be taxable following the financial year 2020-21, and will be computed separately.

Read More: Home Loan Refinancing: Best time and benefits to get home loan refinance, Know the whole process

The rules will take effect on April 1, 2022.

These restrictions will take effect on April 1, 2022, according to the CBDT. If you have more than Rs 2.5 lakh deposited in your PF account in the financial year 2021-22, you will have to pay tax on the interest earned on that additional amount. You’ll have to include this information in your next year’s income tax return filing. If a person’s account does not have any employer contributions, his limit will be Rs 5 lakh.

Private-sector employees have their own restriction.

One thing to keep in mind is that the Rs 2.5 lakh per year cap applies only to employees of private enterprises, not to government personnel. If you work for the government, your EPF and VPF contribution ceiling is Rs 5 lakh instead of Rs 2.5 lakh. Meaning, if a government employee deposits more than five lakh rupees in their EPF and VPF accounts each year, they will have to pay tax on the excess.

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