Tax On PF Interest; Government May Review Rules Related To Tax Limit On Employee Provident Fund | Government may withdraw tax rules on investment in EPF, experts criticized

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Mumbai4 hours ago

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Finance Minister Nirmala Sitharaman had said in the budget that employees who contribute more than 2.5 lakh rupees annually in EPF, will have to pay tax on the interest received. – File photo

The government may review the rules relating to tax limit on investment in Employee Provident Fund (EPF). It is believed that the government may abolish the tax on interest on EPF contribution of more than 2.5 lakh rupees.

There was a tax plan for employees to contribute more than 2.5 lakh rupees annually in EPF

Finance Minister Nirmala Sitharaman had said in the budget that employees who contribute more than 2.5 lakh rupees annually in EPF, will have to pay tax on the interest received. However, it was criticized by tax experts, as it would reduce the investment in EPS by employees earning more salary. After this, the Finance Min ister said that they are ready to review this rule.

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Tax on interest on contribution in EPF is not taxed

At present, interest on contribution in EPF is not taxed, but in the general budget, the government had announced a tax on income on contribution of more than 2.5 lakh rupees. The Finance Minister said that it is necessary to understand that under this rule, we wanted to bring such people under the tax net, who take advantage of tax exemption by depositing more money in EPF than average Indians.

The government had made a similar proposal in 2016.

Government’s intention is not to discourage people depositing money in EPF. So we can change this rule. Earlier in 2016, the government made a similar proposal, according to which the interest earned on 60% of EPF was brought under the tax net. But the government had to withdraw the decision due to the protest.

Government does not intend to merge EPF into NPS

According to sources, the government is planning to merge the EPF with the National Pension Scheme (NPS). But the Finance Minister made it clear that the government’s intention is not to merge EPF into NPS. He told that the EPF will continue in its present form. Contribution to EPF is easy for middle income people.

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