During the Corona epidemic, the government made the complicated process of withdrawing money from PF easy. Now the government has also looked at this part of the employees’ earnings.
On the first day of February, Finance Minister Nirmala Sitharaman presented the General Budget in Parliament and made several announcements to improve the country’s economy. Apart from this, the Finance Minister also made a big announcement regarding the Employees Provident Fund (PF). During his budget speech, he said that the tax paid on the interest received by an employee who contributed more than two and a half lakh rupees in a financial year in the PF. People consider PF to be the backbone of their old age.
During the Corona epidemic, the government made the complicated process of withdrawing money from PF easy. Now the government has also looked at this part of the employees’ earnings. Now, how much will it affect you and what will be the effect on your Voluntary Provident Fund (VPF), let us know from the experts.
What is EPF?
EPF is a government run scheme, which is looked after by the Employees Provident Fund (EPFO). Under this scheme, such employees, institution, company comes where 20 or more than 20 employees work. EPF is mandatory for all government and non-government employees. According to the rules, registration of a company in which more than 20 employees are employed is mandatory in the Employees Provident Fund Organization. Whatever money is deducted under this is only for the employee only.
How much impact on voluntary provident fund?
Will the new provision of the government affect the Voluntary Provident Fund? Expert Gauri Chadha told TV9 Hindi that the new provision has been made only for those saving money under the Voluntary Provident Fund. Many employees can come under its purview. Only because of the PF that is cut on salary, very few people will come in the range of 2 lakh 50 thousand. Employees will have to pay tax on the interest of additional contribution above 2 lakh 50 thousand.
How much interest on PF will affect the salary class?
Gauri Chadha says that till now whatever contribution was made in the PF was subject to exemption under 80C of income tax up to one and a half lakh. Apart from this, no tax was charged on the interest received on it. But now it will be changed from April 1 and the contribution of PF above 2.5 lakh will now be taxed.
Suppose your contribution to your PF is three lakh rupees, then there will be about 8.5 percent tax on the amount after 2 lakh 50 thousand. Also, 4 percent health and education cess will also be added on it.
Why did the government take this step?
The government has said about its decision that an effort has been made to make different ways of saving a common. The government argues that the employees who get more salary and deposit a large part in the PF make the interest money tax-free. The government has taken this step to clamp down on such people. Apart from PF, tax is levied on investing that money anywhere.
What is the finance secretary
Finance Secretary Ajay Bhushan Pandey says on this decision of the government that 99 percent of the total taxpayers income is below 20-25 lakhs. In such a situation, they all fall under the ambit of 2.5 lakhs and there will be no additional burden on them. Higher earning people should not be given the benefit of tax money of lower earning people. Therefore, the government has taken this step.
