Provident Fund: FM has clarified that the government is not planning to merge Employee Provident Fund (EPF) into the National Pension Scheme (NPS)
Finance Minister Nirmala Sitharaman has clarified that the government has decided to tax interest on investment of more than 2.5 lakh rupees in the budget 2021, for tax liability on those who invested heavily in the Provident Fund. The finance minister said in an interview to a newspaper that in the budget, provident funds are willing to revisit the tax declaration on interest on investment of more than Rs 2.5 lakh.
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The finance minister has also clarified in the interview that the government is not planning to merge the Employees Provident Fund (EPF) into the National Pension Scheme (NPS).
He told the newspaper, “We do not want to prevent those whose income is more than 15,000 rupees every month from becoming part of EPF (Employee Provident Fund). 2.5 lakh rupees limit is ready for discussion anytime. I can reconsider the decision and review it. But this is a matter of principle. We are only reaching those who are investing more than the average monthly income of an average Indian in EPF. ”
The Finance Minister also clarified on the rising prices of petrol and diesel. He said that the central and state governments should sit down and think together to resolve this issue.
He said, “It can be an option to bring (petrol and diesel) under the purview of GST – this will bring them across the country at a price. The GST Council can consider it. But the thing is that even then, the matter will have to be made between both the Center and the state. ”
What is the tax issue on PF?
If you do a job, then every month you deduct money from your salary for your retirement and go to EPF (Employee Provident Fund). You give 12% of basic salary and another 12% is given by the employer. Now if you make a total contribution of 20,833 rupees in a month, then no worries, but if your contribution goes above this, then you have to pay tax on the interest received from EPF. That is, if your EPF contribution crosses the Lakshman line of 2.5 lakhs, then tax will have to be paid according to your slab.
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It is only a matter of concern for those who increase their PF contribution through the route of Voluntary Provident Fund. Each employee can only contribute 12% of the basic of his salary. But if someone wants to do more than this, then he can put up to 100% of his basic through VPF. Now who can it be? These are the people who are directors or owners of companies or in high positions who can increase their contribution. Do you know that out of 4.5 crore PF holders in India, there are 0.3% accounts with contribution of more than 2.5 lakhs.
