What is Tax rule on EPF?
Well the news is little rude to EPF member, but it is the reality now. Earlier Tax is not implemented to employee in the head of Provident Fund. Now it is Taxable. Income Tax department levied Income Tax from each EPF member if they are eligible.
Eligibility of Tax on EPF
An employee shall be member of EPF and annual EPF contribution and interest shall be greater than 2.5 lakh in case of a private employee and more than 5 lakh in case of a government employee to become eligible for Tax on EPF.
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What is the ceiling of Taxable EPF ?
For Private sector Employee: Upper limit for tax free employee
contribution is Rs. 2.5 lakhs. Interest on contribution beyond 2.5 lakhs will be taxable.
For Government sector Employee: Upper limit for tax free employee
contribution is Rs. 5 lakhs. Interest on contribution beyond 5 lakhs will be taxable.
Definition of Taxable EPF
An limit has been fixed for both Private & Government Sector Employee. If the contribution cross that amount & that extra amount is considered as Taxable EPF. Interest on contributions also considered in the same way for consideration of Taxable EPF.
Is Interest amount shall be considered as Taxable EPF ?
Yes, Interest on contribution is considered as Taxable EPF. If Interest on contribution exceed 2.5 lakh for Private Employee & 5 Lakh for Government Employees than that exceeding amount will be considered as Tax EPF for Interest.
Why tax to be levied on EPF ?
Earlier EPF was completely Income Tax exempted. Gradually it was found in PSU and in Private sector, senior management employees were drawing high salary. So their Basic and DA are high and ultimately they contribute high amount to EPFO.
When they contribute more they obviously draw more at the time of maturity. Here Government finds an opportunity to generate income by income tax implication to the shoulder of employee as a mode of direct Tax.
Well the debate is remarkable and long. When we talk about benefit, no doubt here benefit for the nation however there is loss in the end of EPF member who is having high salary.
When income Tax rule on EPF is effective ?
As per the earlier rule, EPF was not Taxable. However after the 1st April ,2020, Government declares Tax rule on EPF. As per the amendment of Finance act, 2021,Tax is charged on EPF Contribution, EPF Interest, EPF withdrawal amount.
What percentage of tax to be imposed ?
10%, Generally 10% Tax is deducted from EPF. Tax will be decided as per Income Tax rule. Mainly it is decided as per Tax category of a salaried person fall in.
Who will be in loss after effective after effective of this rule ?
High salaried person in the company are coming under loss. Mainly Company COO, CEO, CHRO, Senior management officials will bear the loss.
Is Tax deducted on EPF withdrawals ?
Yes, As per the amendment of Finance Act ,2021, EPF withdrawal amount is also Taxable. Yes, Ceiling is set , if employee EPF withdrawal limit exceeds that ceiling he or she fall under Tax liability and appropriate percentage of tax will be levied.
What Tax deductions on EPF withdrawals before 5 Years ?
EPF withdrawal amount was not Taxable before 5 years. On the year of 2021 EPF contribution, EPF withdrawal, EPF interest amount all are taxable.
Are EPF contributions taxable ?
Yes, For Private sector Employee: Upper limit for tax free employee
contribution is Rs. 2.5 lakhs. For Government sector Employee: Upper limit for tax free employee
contribution is Rs. 5 lakhs.
What is the Taxable interest threshold for EPF & VPF ?
Taxable Income of PF considers both EPF and VPF amount. If the accumulation of both EPF and VPF exceeds the ceiling limit Tax exemption then Tax is charges on that extra amount.
For Private sector Employee: Upper limit for tax free employee
contribution is Rs. 2.5 lakhs. For Government sector Employee: Upper limit for tax free employee
contribution is Rs. 5 lakhs.
Calculation of Taxable interest on EPF contributions.
As per Income Tax rule tax is levied on EPF contribution. It depends on the Tax slave of concerned employee on that time. It is simply the percentage of on the extra amount of contribution he or she carried at that time.
Is EPF Tax exempted for me ?
Those who are coming under the purview of exempted category under Income Tax rule.
EPF withdrawal Taxability:
EPF withdrawal Taxability is applicable if PF amount is more than its Tax limit. It is defined separately for both government employee and private employee.
Is EPF received under Income Tax ?
No, PF is receive under EPFO, Employee Provident Fund Organization. The rule is completely different. EPF is governed by Employee Provident Fund Scheme, Tax is governed by Income Tax rule.
IS EPF maturity amount Taxable ?
Yes, when EPF amount come to maturity and credited to employee bank account Government charges Income Tax on the maturity amount.
