Are you investing in public provident funds? Contributing to more than one of them each month? But you must know one thing for sure.
The central government has given a jolt to PF clients. Sad for high-income employees. The Modi government is ready to reduce tax concessions on employee contributions to provident funds. Union Finance Minister Nirmala Sitharaman has made a key proposal in this regard in the latest budget.
The Center has taken this decision to amend the tax exemption on income earned by high-income employees. There is currently no tax on the amount of interest accruing on the EPF. With this the matter went to the Center that many employees were contributing large sums to the Provident Funds. There is no tax on interest earned on such contributions. With this, the Center decided to impose a tax exemption limit.
This will no longer be the case. Takes tax. Interest earned on an annual PF contribution exceeding Rs. 2.5 lakhs is taxable. This means that if your PF contribution is less than Rs 2.5 lakh per annum, no tax will be levied. Interest earned on the amount exceeding this limit is taxable. The new proposal will take effect from April 1.
Currently, the PF account earns 8.5 per cent interest. 12% of the employee’s salary goes to the PF account. The company will also credit the same amount to the employee PF account. However, the new rule being introduced by the central government will have a greater impact on those who invest in the Voluntary Provident Fund.
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