High salaried PF account holders have given big relief to the EPF account holders who get more salary. Finance Minister Nirmala Sitharaman (FM Nirmala Sitharaman) has increased the tax exemption limit in the interest on the contribution to the Provident Fund (PF) to Rs 5 lakh.
Earlier in his budget speech, the Finance Minister had said that the interest on the contribution of more than 2.5 lakh rupees in EPF will be taxed, but now Nirmala Sitharaman has doubled this limit. However, the condition for this is that the contribution of the company in this limit up to Rs 5 lakh should not be more than 12%. This new rule regarding PF will come into effect from April 1, 2021.
Employees will get these benefits
If you invest in Voluntary Provident Fund ie VPF and Public Provident Fund ie PPF, then you will not have to pay tax on the interest on the total annual investment up to Rs 5 lakh. Let us tell you that the employer in VPF and PPF, ie the institution in which you work, has no contribution.
Budget was announced in 2021
Finance Minister Nirmala Sitharaman announced in Budget 2021 that the interest on EPF investment up to Rs 2.5 lakh per annum will be tax free, but the interest will be taxed on the investment made on it, although it will be taxed in the company. Contribution will not be included. The government had taken this step to curb those who earn interest by putting their surplus money in a PF account, while PF is a retirement fund.
Over 6 crore shareholders of EPFO
Nirmala Sitharaman had said in the budget speech that only 1% EPF account holders will be affected by the tax levied on interest on PF. There will be no impact on other shareholders, as their annual PF contribution is less than Rs 2.5 lakh. Let us tell you that EPFO has more than 60 million shareholders.
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