Do you know provident fund investment will now be tax free up to Rs 5 lakh. Simply put, if you invest five lakh rupees in a provident fund in a financial year, then the interest earned from it will be tax free. This time Finance Minister Nirmala Sitharaman had said this during the budget. In order to provide this special facility, the government has had to change the rules. Let us know what is that change and who can take advantage of this change.
Which rules have been amended by the government
Earlier, investment in provident fund up to Rs 2.5 lakh in a financial year was tax-free. Replying to the discussion in the Lok Sabha in the Finance Bill 2021 this year, the government had announced to increase the annual limit of tax-free interest on deposits in PF to Rs 5 lakh. Let us tell you that while presenting the budget on February 1 this year, Finance Minister Nirmala Sitharaman had said that interest earned on investments above Rs 2.5 lakh will come under the tax net.
Who will benefit
The question arises as to who will benefit from this new change. Those who will get the benefit of this new amendment, in which only the employee will contribute. If the employer does not make any contribution on his own behalf, then the interest earned from PF investment up to Rs 5 lakh will be tax free.
What did the Finance Minister say at the time of announcement?
Finance Minister Nirmala Sitharaman had then said that the Provident Fund Fund is generally contributed by both the employee and the employer, but there is also such a contribution which is only from the employee’s side, in which the employer’s share is not. This new provision has come into force from April 1.
The Employees’ Provident Fund Organization (EPFO) has about six crore subscribers. The Finance Minister said that only one percent of the provident fund account holders will be affected by the tax proposal imposed on the interest received on the provident fund. There will be no impact of this tax proposal on other account holders as their annual PF contribution is less than Rs 2.5 lakh.
