Advertisement
Monday, Oct 18, 2021
Outlook.com
Outlook.com

Union Budget 2021: Here's How New PF Rules May Impact You

It is noticed that minimum 12% of an employee's performance wages and basic salary is compulsorily deducted as provident fund, while the employer contributes another 12%.

Union Budget 2021: Here's How New PF Rules May Impact You
Representational Image
Union Budget 2021: Here's How New PF Rules May Impact You
outlookindia.com
2021-02-22T08:48:58+05:30

Finance minister Nirmala Sitharaman in Union Budget 2021 announced that interest on employee contributions to the provident fund of over Rs 2.5 lakh per annum would be taxed, starting from 1 April.

The annual contributions up to Rs. 2.5 lakh has been kept as the deposit limit on which tax exemption is allowed.

Here's how it will impact people with high-income:

The new rule is likely to impact people with high-income bracket and High Net Worth Individuals. The employees with salaries who use 'Voluntary Provident Fund' will invest more than the mandatory 12 per cent of basic pay

It is noticed that a minimum of 12 per cent of an employee's performance wages and basic salary is compulsorily deducted as provident fund, while the employer contributes another 12 per cent.

Founder and chief executive officer, ClearTax Archit Gupta said, "As paying tax-free interest on provident fund becomes more and more unsustainable, the government wants to curb high-income earners from self contributing more to their PF accounts," Mint quoted Archit Gupta

While KPMG's Tax expert Parizad Sirwalla said, "Under the existing tax provisions, interest received/accrued from employee’s provident fund (EPF) is exempt from tax. It is proposed that the interest earned on the EPF contributions (only employee contribution) above Rs 2.5 lakh a year will now be taxable. This could potentially impact employees in high-income bracket or employees making large voluntary employee provident fund contributions"

It is also observed that the new provision only takes into considerations the employees’ personal contribution to the fund and not the total contribution during any year

"The big-ticket money which comes into the fund and gets tax benefit as well as assured about 8% returns that would come under the tax ambit, Nirmala Sitharaman added while presenting new Budget

Advertisement

Outlook Newsletters

Advertisement
Advertisement
Advertisement

Read More from Outlook

Kashmir Civilian Killings: Panicky Migrant Workers Start Leaving Valley

Kashmir Civilian Killings: Panicky Migrant Workers Start Leaving Valley

Some workers shifted to safer localities after militants kill two more labourers from Bihar.

‘Rail Roko’ Hits Railway Operations in Punjab And Haryana

‘Rail Roko’ Hits Railway Operations in Punjab And Haryana

Protest called by SKM demanding removal of Union MoS (home) Ajay Mishra goes on peacefully, commuters affected.

IND vs ENG, T20 World Cup 2021, Live: Battle Ready Teams In Warm-Up Clash

IND vs ENG, T20 World Cup 2021, Live: Battle Ready Teams In Warm-Up Clash

Follow live cricket scores of India vs England T20 World Cup warm-up match in Dubai. Several English players played in the recently concluded IPL in UAE.

India Strengthens Day And Night Surveillance Over LAC In Arunachal Sector

India Strengthens Day And Night Surveillance Over LAC In Arunachal Sector

India has strengthened overall military preparedness at LAC using a fleet of remotely piloted aircraft and other assets to deal with any Chinese misadventure in the sector.

Advertisement