New Delhi: The Central Board of Direct Taxes (CBDT) said that the Employee Provident Fund (EPF) subscribers whose contribution exceeds Rs 2.5 lakh in a financial year will be required to maintain two separate accounts from the ongoing financial year.
CBDT’s guideline has been issued after Budget 2021-22 made space for a new provision making interest on annual PF contributions of more than Rs 2.5 lakh taxable.
So, with two separate accounts – taxable account and non-taxable account – in place, it will be easier for taxpayers and the income tax department to calculate the interest on such investments.
The latest notification by the CBDT has also put an end to the confusion that followed after the announcement of the taxation on interests in the Budget 2021-22.
The notification suggests that the new rule will be implemented from the financial year 2021-22. This means that interest on all your EPFO contributions above Rs 2.5 lakh will be taxable.
However, for EPFO accounts that don’t receive contributions from the employers’ side, the limit on interest on PF investments is set at Rs 5 lakh.
Notably, subscribers or employers don’t need to do anything extra for creating a taxable account, as the second account will be opened automatically. Also Read: Hyundai i20 N Line hits Indian roads: Check price, specs and other details
Moreover, tax on the interest on investments in the taxable accounted will be calculated after deducting the withdrawals made in a particular financial year. Also Read: Elon Musk’s jab on Jeff Bezos, says THIS is how Amazon founder spends his time