Your employees' provident fund (EPF) statement will now show two accounts inside your provident fund account beginning this fiscal year. According to a Central Board of Direct Taxes (CBDT) announcement, one will capture the non-taxable portion of the employee's EPF contribution, while the other will contain information regarding the taxable component. "For the purpose of calculating taxable interest...separate accounts within the provident fund account should be kept for taxable contribution and non-taxable contribution made by a person during the prior year 2021-2022 and all subsequent preceding years," the circular added.
However, this does not always need the creation of two different accounts; your EPF UAN (universal account number) will stay the same. "At the moment, the yearly provident fund statement shows your contribution, interest gained, employers' contribution, and amount reserved for employees' pension scheme" (EPS).
Finance Minister Nirmala Sitharaman said in the Union Budget 2021 that interest generated on employee contributions to their provident fund in excess of Rs 2.5 lakh per year will be taxed. The administration claimed that the change would affect less than 1% of taxpayers at the time. That is, high-earners with a base yearly income of more than Rs 21 lakh (Rs 1,73,612 a month).
This EPF contribution level is greater for government employees, at Rs 5 lakh. This will take effect in the fiscal year 2021-22. (assessment year 2022-23).
Every month, your employer deducts 12% of your basic pay as your EPF contribution, adds a matching amount as their contribution, and deposits it with the EPFO. If the amount deducted as your contribution in a financial year exceeds Rs 2.5 lakh, the interest generated on this excess amount would be taxed at the appropriate slab rate. It will also be taken into consideration if you make any additional, voluntary contributions during the year.
The PF statement may give detailed data.
To collect the information, the IT department has created two accounts within your PF account.
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