Eye on PF interest
Provident fund is the biggest attraction for those getting salary at the time of retirement. The amount received from EPF is completely tax free, but the interest on it is not added to your income. Finance Minister Nirmala Sitharaman has announced in the budget that there is a proposal to bring the interest paid on PF contribution of Rs 2.5 lakh or more annually in the new fiscal year starting from April 1.
Who is within the scope of the new rule?
After this budget provision of the Finance Minister, those earning more will now have to pay tax on the provident fund. Those who have more basic salary or basic salary, they will come under its purview.
Which salary affect?
If your current basic salary is up to Rs 1,73,611 per month and you are not contributing to the VPF, then you do not have to worry about tax on the interest of PF charged in Budget 2021. Those whose current salary is less than this level, the new tax will not have any effect on them.
Less salary does not affect
12% of your basic salary goes as contribution to EPF. Essential EPF contribution is 12% of basic salary. If you multiply 12 per cent of Rs 1,73,611 by 12 months, then this amount comes to Rs 2.5 lakh..
VPF contribution too?
In voluntary PF or VPF, a maximum of 100 percent of basic salary can be contributed along with EPF. If a person’s EPF and VPF are equal, then it will be 24 percent of the basic salary. In this way, if a person is contributing 24 per cent to EPF and VPF and his basic salary is less than Rs 86,806, then the tax levied on the interest of PF will not be affected.
Decrease VPF contribution
If your basic salary is more than this and you are contributing more than 12 percent in VPF, then you can be affected by this new rule. To avoid this, you have to reduce your VPF contribution.