After the announcement of Budget 2021, those investing in Provident Fund (PF) have received a setback. Union Finance Minister Nirmala Sitharaman has announced that now investing only up to 2.5 lakh rupees in a financial year will get the benefit of tax exemption. That is, if you have invested more than this, then the interest earned will come under the tax net. Currently, the interest rate on PF is 8 percent and the income from interest is completely tax free.
After the announcement of Budget 2021, those investing in Provident Fund (PF) have received a setback. Union Finance Minister Nirmala Sitharaman has announced that now investing only up to 2.5 lakh rupees in a financial year will get the benefit of tax exemption. That is, if you have invested more than this, then the interest earned will come under the tax net. Currently, the interest rate on PF is 8 percent and the income from interest is completely tax free.
This means that if someone’s PF accumulates more than 2.5 lakhs in a year, then they will have to pay interest on the return received on it. This rule will be applicable from 1 April 2021. According to the new rule, such individuals whose provident fund contribution is 2.5 lakh or more in a financial year, then they will not be able to avail tax rebate on the interest earned from the next financial year.
The return income from investment of up to Rs 2.5 lakh per annum from investment in provident fund of employees was kept tax free. Now the returns from the investment above this will be taxed.
Presenting Budget 2021, Finance Minister Nirmala Sitharaman said, “Withholding tax exemption on returns earned from annual contribution of 2.5 lakhs for various provident funds of employees for the sake of rationalizing the tax exemption for income earned by large earning employees Is proposed Till now the returns on provident fund were exempt from tax.
In the press conference held after presenting the budget, Nirmala Sitharaman said, ‘EPFO is for the welfare of workers and they will not be affected by this step. This is only for the huge amount that comes in EPFO, which gets relief from tax and also gets 8% return.
Congress targeted
Significantly, investment in the Provident Fund, National Pension Scheme also provides tax benefits. Under this, investment comes under section 80C. Apart from this, interest income and withdrawal is also completely tax free. At the same time, Congress has targeted the PF to bring it under the tax net. Congress leader Sushmita Dev tweeted, there is a plan to sell government property to the capitalist friends in the budget 2021 of the Modi government. No relief has been given to the deprived sections. The biggest hit has been the middle class by bringing PF under the tax net. There is no relief on petrol, diesel and LPG. A rural woman has been hurt by a 42 per cent reduction in NREGA funds.
