In order to target high-income taxpayers who benefit from the programme, the government has chosen to scale down the tax advantages under Budget 2021.
The Employee Provident Fund (EPF) is one of the most significant retirement investing and financial planning options for millions of employees.
EPF is the preferred investment for most because to its guaranteed earnings and tax advantages. Tax exemptions were offered under the Exempt, Exempt, Exempt scheme (EEE) for both fund contributions and accrual withdrawals.
However, the tax advantages offered to companies and workers for payments to the EPF have been changed by the government. Provident fund accounts will be split into taxable and non-taxable accounts as of April 1, 2022.
Also Read: EPF Claim Status Shows Payment Under Process
The government has chosen to target high-income taxpayers who take advantage of the EEE programme by reducing the tax advantages under Budget 2021.
The following are the 10 things you should know about EPF:
1. For FY 2021–2022, the EPFO lowered the interest rate to an all-time low of 8.1%.
2. Only contributions of up to 2.5 lakh per year qualify for tax-free treatment of interest on employee EPF contributions.
3. The employee is annually taxed on interest on contributions exceeding 2.5 lakh.
4. If an employer does not make a contribution to an employee’s EPF, the contribution threshold is raised to 5 lakh.
5. The whole contribution is not taxed; only the excess contribution that is above the threshold is.
6. A separate account with the EPFO will be kept for the surplus contributions and interest that has accumulated on them.
7. Employer contributions to Provident Fund (PF), NPS, and superannuation totaling a combined amount of 7.5 lakh rupees per year are tax-exempt.
8. Since employers will deduct taxes based on accruals, Form 16 and Form 12BA must provide these facts.
9. Employees with monthly incomes up to 15,000 rupees must receive EPF payments from their employers by law.
10. Employees must report taxes withheld in this way as “Income from other sources.”
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