In the budget, the government has announced a tax on the interest of those who contributed more than 2.5 lakhs annually to the PF account. However, no detailed information has come from the government about this. It is possible that such people will have to maintain a separate PF account.
New Delhi. If you contribute more than 2.5 lakh rupees a year to the Provident Fund (PF), then you should be prepared for the annual tax deduction on its interest. It is also being considered that the account with limit up to tax free should be maintained separately. In fact, in this budget (Budget 2021), the government has proposed that tax will be levied on the interest of those who contribute more than 2.5 lakh rupees per annum, but during the announcement, the government also said that its details are still being worked on. Will be done. Tax experts say that this process is going to be a bit complicated. If full tax is collected at the time of withdrawal then the employees may have to maintain a separate account.
A media report quoted sources as saying that the government is considering maintaining two accounts for those contributing more than Rs 2.5 lakh annually. In the first account, there will be information about the contribution of up to Rs 2.5 lakh, while in the second account there will be information about the income from interest on the contribution of more than Rs 2.5 lakh. It is believed that doing so will help in avoiding complicated accounting rules.
The issue of tax arithmetic may be stuck in the new proposal.
There is also a concern that the interest on the amount above the tax free level will be earned annually or will be given at the time of withdrawal? There is also a problem in the mathematics of the new proposal that at the time of withdrawal, the income of the employee can increase so much that they may have to pay tax according to the higher tax bracket. In some cases, employees will fall under the category of ‘super rich’ and they will have to pay more than 42 percent tax.
Clarity regarding TDS is also necessary. The
government also has to clarify who will deduct TDS. The proposed tax on the interest earned will be considered as income from other sources. In such a case, will TDS be deducted from the employer or will section 194A apply. Clarity is also needed on this.
of this announcement on provident fund, all eyes are now on the government. In fact, many employees in the middle-class category contribute voluntary PF, due to which their annual contribution to the PF account exceeds Rs 2.5 lakh. However, the government believes that this move will affect people with high net worth. A recently released data has shown that there is a person whose PF balance is more than Rs 100 crore . However, the PF balance of two people was more than Rs 80 crore.
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