The government has decided to levy income tax on the interest earned on the contribution of more than 2.5 lakh rupees in the financial year.
New Delhi: The decision to abolish tax exemption on the contribution of more than Rs 2.5 lakh in the Provident Fund (PF) account will not be applicable to the Public Provident Fund ie PPF. A senior officer has given this information.
The government has proposed a change in the tax rules for provident funds. It has decided to collect income tax on the interest earned on the contribution of more than 2.5 lakh rupees in the financial year.
“The exemption for EPF (Employees Provident Fund) and GPF (General Provident Fund) has been removed,” the official said. The Act mentions this. “The Central Board of Direct Taxes (CBDT) did not respond to a question about the matter.
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Tax Experts said that one of the major changes in the Union Budget for the financial year 2021-22 is to levy tax on the contribution of more than 2.5 lakh rupees. However, the budget document does not state the feasibility of a change in the rule.
Aarti Raote, partner at Deloitte India, said, “The section given in the budget memorandum says that PPF is included in it.” However, there is a limit of contravention up to Rs 1.5 lakh in a year in PPF Act itself. Therefore, banks do not accept money beyond this limit. In such a situation, taxpayers are unable to cross the Rs 2.5 lakh limit anyway. ”
Some experts say that there will be no effect of changes in income tax act. The reason is that any change in the PPF contract will require a change in the PPF Act.
Tax partner in EY Shalini Jain said, “Until the PPF rules are changed and the limit of the contractions is not increased to more than Rs. 2.5 lakhs then the amendment in section 10 (11) from the perspective of PPF is just Will be bookish. “
The government has said that many people who earn big money invest heavily in Employee Provident Fund. She wants to stop the misuse of this facility available in the EPF. This will affect less than 1 percent of the contractors.
Finance Ministry officials said that the government had conducted a study before the budget. In it, he found that in the financial year 2018-19, the EPF corpus of about 123,000 people was Rs 62,500 crore. At the same time, there were about 825 crore rupees in the accounts of the top 20 rich contractors. There were more than Rs 2,000 crore in accounts in 100 contractors. The EPF has 6.33 crore members.
