Background
New CBDT Circular has been released about New PF rules 2021 according to which TAX on PF Interest in Budget 2021 will be calculated.
The Finance Ministry has notified new PF related Income Tax rules 2021 to implement a fresh tax on Provident Fund (PF) savings. This can impact your EPF / VPF /GPF savings as the Interest earned on Employee Contributions above 2.5 lakh or 5 Lakh will now be taxable depending on type of contribution.
While people thought that only those within Ultra high income will get impacted, it surely is going to impact a much wider population. A change has been introduced in Union Budget 2021, wherein interest earned over contribution in EPF / VPF for an amount greater than 2.5 Lakh will be considered to be taxed.
All existing employees provident fund (EPF) accounts will be divided into taxable and non-taxable contribution accounts. In order to implement the new tax on PF income from employees’ contributions exceeding ₹ 2.5 lakh annually, a new Section 9D in the income tax rules has been included.
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