New PF Regulations: All existing PF accounts will be split into taxable and non-taxable contribution accounts as of April 1. Under the IT regulations, a new section 9D has been added to impose a new tax on PF income from employee contributions exceeding Rs 2.5 lakh per year.
New PF Rules: There is some extremely good news for job searchers. If you work, you almost certainly have an account with the Employees’ Provident Fund Organization or EPFO. For your knowledge, the PF account is now subject to taxation as well. A portion of your pay is paid into your PF account. However, the PF rules are about to undergo some adjustments. Existing PF accounts can be divided into two pieces starting April 1, 2022.
These PFs will be taxed in their entirety.
It’s worth remembering that the government announced new income tax laws last year. PF accounts will now be separated into two halves as a result of this. In this situation, a tax will be applied on PF income if an employee contributes more than Rs2.5 lakh to the government yearly. In reality, the new laws are intended to prohibit high-income individuals from taking advantage of the government’s welfare program.
Read More: Alert! Income Tax Department has issued a warning! Otherwise, there will be a significant loss.
Learn the most important aspects of the new PF rules.
Taxable and non-taxable contribution accounts will be created from current PF accounts. Because the closing date is March 31, 2021, non-taxable accounts will also contain their closing account.
The new PF regulations will take effect on April 1, 2022, which is the start of the following fiscal year.
Under the IT rules, a new section 9D has been added to impose a new tax on PF income from employee contributions exceeding 2.5 lakh per year.
In the existing PF account, two separate accounts will be formed for calculating taxable interest.
If an employee pays more than Rs 2.5 lakh to his provident fund in a financial year, he must pay tax on the interest deposited above Rs 2.5 lakh, according to a new provision of the Finance Act 2021. This is going to happen. For example, if an employee has a Rs 3 lakh investment, he must pay tax on the interest received on the remaining Rs 50000. This ceiling will only be Rs 5 lakh for central government employees.
Rule 9D is something you should be aware of.
According to the new laws, the CBDT has issued Rule 9D, which calculates tax on interest paid on Provident Fund Contributions. The Provident Fund will now have two types of accounts. The first is a taxable account, whereas the second is a non-taxable account. The 9D rule instructs you to manage two accounts.
an account that is taxable
According to the new rule, if a person deposits more than Rs 2.50 lakh in his or her EPF account in the current financial year, the interest earned on the excess money would be taxed. The remaining funds will be deposited in a taxable account for tax purposes. However, the interest earned on it will be taxed.
Not subject to tax
If Rs 5 lakh is put in an EPF account under the new rule, the sum will be deposited in the account tax-free till March 31, 2022. That is, it will be exempt from taxation.
These taxpayers are unconcerned.
Let us inform you that most PF members will profit from the Rs 2.5 lakh limit after the adoption of this new rule. The new rule, however, will have no impact on small and middle-income taxpayers. This will mostly affect employees who earn a lot of money. That is, if your pay is modest or average, this new regulation will not apply to you.
