Tax On PF Account: No good for those who keep big amount in PF account to save tax, Modi government is preparing to change the rules

PPF News: It will not be easy for the big earners to keep money in PF account. The government has decided to collect tax on the contribution of more than two and a half lakh rupees in provident fund (PF) account. For this, the government has made a proposal to change the rules. 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.

In this regard, an official said that the tax exemption for Employees Provident Fund (EPF) and General Provident Fund (GPF) has been removed. This is mentioned in the rule. However, the Central Board of Direct Taxes (CBDT) did not respond to a question asked about the matter. Tax experts are of the view that taxation on interest of contribution of more than Rs 2.5 lakh in the Union Budget for FY 2021-22 is one of the major changes. However, the budget document does not state the feasibility of a change in the rule.

Tax experts say that the clauses given in the budget document say that PPF is included in it, but the PPF rule itself has a limit of contribution of up to Rs 1.5 lakh in a year. Therefore, banks do not accept money beyond this limit. In such a situation, the taxpayers are not able to cross the Rs 2.5 lakh limit anyway. ”

Some experts say that there will be no effect of change in income tax law. The reason for this is that any change in PPF contribution will require a change in PPF rules. He says that till the PPF rules are not changed and the contribution limit is not increased to more than 2.5 lakh rupees, then the amendment in section 10 (11) from the PPF point of view will be only bookish.

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On the other hand, the government argues that many people who earn well invest heavily in the Employees Provident Fund. She wants to stop the misuse of this facility available in the EPF. This will affect less than 1 percent contribution.

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 1,23,000 people was Rs 62,500 crore. At the same time, there were about 825 crores in the accounts of the top 20 rich shareholders. There were more than Rs 2,000 crore in the accounts of 100 shareholders. However, the EPF has 6.33 crore members.