If the annual amount deposited in PF in the private sector is more than Rs 2.5 lakh, then now you will have to pay tax on the interest received on it. For government employees, this limit has been kept at Rs 5 lakh.
PF News: During the general budget in February, the Finance Ministry had talked about levying tax on the interest received on PF amount. If you work in the private sector and the annual amount deposited in PF is more than Rs 2.5 lakh, then now you will have to pay tax on the interest earned on it.
At the same time, for government employees, this limit has been kept at Rs 5 lakh. The Finance Ministry has also issued notification of rules regarding this. However, no tax will be levied on any contribution made to PF till 31 March 2021.
According to the Income Tax (25th Amendment) Rules, 2021, interest earned on PF accounts after the financial year 2020-21 will be taxable. If during this financial year, more than Rs 2.5 lakh is deposited in the employee’s account, then he will have to pay tax on the interest earned on this amount. Along with this, the account holder will also have to give this interest information in the income tax return of the next year.
PF accounts will be divided into two different accounts
According to the new income tax rules notified by the central government, PF accounts will now be divided into two separate accounts. In one of these accounts, those accounts will be included in the tax net, and in the other account, the accounts outside the tax net will be included. The Central Board of Direct Taxes (CBDT) has also issued a notification regarding this.
In the budget of this financial year, information was given to levy tax on interest on deposits of more than Rs 2.5 lakh annually in PF. However, this will only affect the high income group. Also, there will be no effect on the amount already deposited in your PF account.
what will be the tax law
If an account holder deposits Rs 3 lakh annually in his PF account, then after removing Rs 2.5 lakh from it, ie Rs 50,000 will be taxed. At 8.5 percent interest rate on Rs 50,000, the account holder will get an interest of Rs 4,250. Now if this account holder falls in the higher tax bracket (30 percent), then he will have to pay Rs 1,325 as tax for the amount received in this interest.
Similarly, if an account holder deposits Rs 12 lakh in his PF account in a year, then he will have to pay this tax on the interest earned on Rs 9.5 lakh. Which will be around Rs 25,200.