If the stake in your PF (Tax on PF Interest) is above 2.5 lakhs per annum, then the amount of interest earned on the portion above it will be in the tax net.
There has been no change in the tax rate or slab in the budget 2021 presented by the Modi government on Monday. Due to this, most of the salary profession will be rarely seen on people. But if your salary is a little more or if you use voluntary provident fund then there is some bad news for you. Meaning if you are considered ‘rich’ because of thick salary, then understand how much burden is going to be on your pocket.
Actually, now if your stake in Tax on PF Interest is above 2.5 lakhs per annum, then whatever amount of interest will be earned on the part above it will be in the tax net. Understand this easily.
If the income is 5 million per annum
Suppose your salary is 50 lakh rupees annually. Roughly half, that is, 25 lakh rupees became your basic salary. According to BASIC, the share of PF increased to 3 lakhs (12%). Till now, no interest was charged on whatever interest you received on it. In this case, 50 thousand rupees are getting above the limit. That is, the interest received on them will be taxed. PF currently gets 8.5 percent interest. In this case, Rs 4,250 will be given interest on 50 thousand, on which tax will have to be paid. Now how much test will be taken on this, it will be decided according to that you do not have any other source of income. Which means your tax slab. The same thing will apply to the Voluntary Provident Fund (EPF).
When will not pay tax on PF interest
If you put up to Rs 20,833 a month in PF (it will be Rs 2.5 lakh annually). According to this, your basic pay will be 1.73 lakh rupees. In this situation you will not have to pay tax on the interest of PF.