Provident Fund par tax: The Modi government has increased the limit of maximum annual contribution of an employee from Rs 2.5 lakh to Rs 5 lakh in relation to keeping the interest on Provident Fund tax-free. Finance Minister Nirmala Sitharaman said that the interest paid on the contribution of the employee up to Rs 5 lakh in provident fund (PF) will not be taxed.
Provision was not made in the budget
Finance Minister Nirmala Sitharaman announced in the 2021-22 budget presented in Parliament on February 1, 2021, that on interest on contribution of more than Rs 2.5 lakh per annum in the PF of the employees in the new financial year starting from April 1, 2021. Tax will be levied. For this, the contribution made by the employer was not included in the calculus.
Discussion on Lok Sabha in Finance Bill 2021
Sitharaman, while answering the discussion in the Lok Sabha in the Finance Bill 2021, announced to increase the annual limit of tax-free interest of deposits in PF to Rs five lakh. He said that this increased limit will be applicable on contribution where there is no contribution from employer in this PF.
These people will benefit
The Finance Minister said, “My intention is to increase this limit only in such PF contribution where the employer does not have contribution in the PF.” Are because the employer’s contribution is limited to 12 percent of the basic salary of the employee.
Process to pass budget 2021-22 completed
After Sitharaman’s reply, the House passed the Finance Bill 2021 by voice vote. With this, the process of passing the budget 2021-22 was completed in the Lok Sabha. After the passage of the Finance Bill from Parliament, the tax provisions made for 2021-22 get approved. The bill was passed after accepting 127 amendments to the proposed legislations in it.
One percent provident fund account holders only
The Finance Minister said that only one percent of provident fund account holders will be affected by the tax proposal on interest received on provident fund. This tax proposal will not have any effect on other account holders as their annual PF contribution is less than 2.5 lakh rupees.
Contribution of both employee and employer to provident fund
Sitharaman said, “Normally, both the employee and the employer contribute to the provident fund, but there is also a contribution that is only on behalf of the employee, not the employer.”
EPFO has 60 million shareholders
This new provision will come into effect from April 1. The Employees Provident Fund Organization (EPFO) has about six crore shareholders. On the issue raised by members about high tax rates on petrol and diesel, Sitharaman said that she would like to discuss the issue of bringing petrol and diesel under the purview of GST in the next meeting of the GST Council.
Disinvestment target will be achieved
He reminded the members that only the Central Government does not impose taxes on the fuel of vehicles. State governments also impose VAT on petrol and diesel. Regarding disinvestment, Sitharaman hoped that the target set for the next financial year will be achieved. He said that the manner in which the activity in the market has intensified during the Corona period, it is expected that the disinvestment target will be achieved.
Target to raise Rs 1.75 lakh crore
The government has set a target of raising Rs 1.75 lakh crore from disinvestment in the financial year 2021-22. The Finance Minister, while replying to the discussion, also said that the customs structure will be made rational for the convenience of the domestic businessmen, especially the enterprises of MSME Reni. In the case of taxes, he said that the tax base will be broadened. Regarding the equalization fee, Sitharaman said that this will make the conditions similar for domestic businesses who pay tax in India.
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