If you're a member of the Employees' Provident Fund Organisation (EPFO), you should be aware of certain vital information. Beginning April 1, investors will be required to pay tax on interest on provident fund (PF) payments due to recent rule changes.
The following are the five most significant items subscribers should be aware of regarding the new EPF rules:
1. The new rule will not effect all subscribers.
2. Investors who save more than Rs 2.5 lakh per year would have to pay tax on the interest on their PF funds, according to new guidelines.
3. If employee contributions to the PF account do not exceed Rs 2.5 lakh in a year, all interest credited to the account would be tax-free.
4. Experts believe that the new rule change will mostly affect high-income workers with a bigger PF deduction.
5. Prior to Budget 2021, EPF interest was completely tax-free, which meant that investors could put as much money into PF schemes as they wanted without worrying about the taxes.
6. Subscribers will have to pay taxes on interest on savings of more than Rs 5 lakh every year if their employers do not contribute to their PF account.
7. The interest on PF accounts would be taxed every year after the deposits reach Rs 2.5 lakh.
8. The Central Board of Direct Taxes (CBDT) has inserted a new section 9D to the IT rules to implement the new adjustment.
9. Within existing PF accounts, two distinct accounts will be formed to simplify computing taxes on EPF savings easier.
10. One account would hold savings up to Rs 2.5 lakh and the other will hold investments worth more than Rs 2.5 lakh.
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