The Finance Minister has announced in Indian Budget 2021 that the interest on employee contributions will be taxable from April 1 2021. Presently, the interest on Employee Contributions to Provident Fund is fully exempt.
Employee provident Fund is a savings scheme which is to be used for Post retirement by employee all over the country. The Employer and Employee should Contribute minimum 12% each of basic Salary. Interest will be accumulated on both contributions in EPF account
Employer Contribution towards EPF is tax exempted up to a certain limit. As per new rule, Employer Contribution to EPF, National Pension Scheme and Superannuation Fund on an aggregate basis exceeds Rs 7.5 lakhs, it would be taxable in the hands of employee.
Employee Contribution to PF can be claimed as deduction u/s 80C upto a limit of Rs 1.5 lakhs. If PF is withdrawn at the time of maturity or after five years of continuous service then it is tax exempt.
Key Changes in Budget 2021 about taxability of Interest on Employee Contribution and how it effects your Salary & Taxes?
Earlier the rate of TDS on taxable EPF withdrawal is 30% in Non-PAN cases.As per Budget 2023 i.e., w.e.f 1st Apr 2023, TDS rate on EPF withdrawal is reduced to 20%
More emphasis on Infrastructure spending, raised customs duty to create jobs. No new changes to Taxes (Income Tax & GST)
Top three observations from the analysis were
Pictorial analysis on New Vs Old Personal Income Tax Regime