If you deposit additional amount of voluntary EPF i.e. compulsory for higher interest, then stop it immediately. If this amount is invested in debt through mutual funds, then you will get more benefit and risk will also be less.
New Delhi. The central government has proposed to bring more than 2.5 lakh rupees per annum of the Employee Provident Fund (EPF) from the next fiscal year i.e. April 1 to the income tax. That is, if your EPF contribution is more than 2.5 lakh rupees annually, then tax planning will have to be done afresh.
CA Vikas Aggarwal tells that if you deposit voluntary EPF i.e. mandatory amount in excess of interest, then immediately stop it. If this amount is invested in debt through mutual funds, then you will get more benefit and risk will also be less. Stock market expert Sanidhya Agarwal explains that the first thing to be seen in tax planning is how much tax you collect and how much tax is left in the place where you are investing. After this, after paying attention to the investment, the net interest rate received after tax should be removed. By this you will be able to know how much interest you are getting on your investment. This can be understood through various examples.
Actual return on EPF after tax will be only 5.85 percent,
if your basic salary is Rs 41 lakh annually then more than Rs 2.5 lakh on it EPF will be deducted on the amount. Currently, the interest rate on EPF is 8.5%. Keeping in mind the current 30% tax rate (+ 4% cess), the employees will get 5.85% effective interest after paying tax on contribution to EPF of more than 2.5 lakhs per annum.
What is a Voluntary Provident Fund? How to invest, understand
If voluntary EPF is more than 2.5 lakhs, then debt is a good option
If you deposit more than 2.5 lakh rupees in EPF for a higher rate of interest, then in such a situation you will need tax planning. Failure to do so will limit your return to 5.85 percent. Therefore, you can adopt the path of debt funds. Debt funds buy long-term Indian government bonds or state government bonds. Mutual funds also do not have to pay tax on coupons received (interest), which increases income and keeps accumulating. In this way, a good fund is prepared in the long term. While redeeming the fund, investors must pay capital gains tax, the rate of which is currently 20 percent. That is, the highest rate of income tax is about 14 per cent less than the 34 per cent slab. In this case, investors can transfer the money of voluntary provident fund (VPF) to debt fund.
Does not need to worry for their
Employees Provident Fund (EPF under the existing provisions of the Income Tax ), But the interest received is tax free. However, from April 1 this year, interest income from PF contribution (employee’s) of more than 2.5 lakhs per annum will be taxed. Middle-income employees need not panic, but this provision of the budget can affect the employees of the higher income group.
