The employee provident fund (EPF) is one of the most important millions of financial and retirement financial investment.
With insured yields and tax advantages, the EPF is the essential investment for the most part. Within the framework of exempt, exempt and exempt tax exemptions (EEE), were also available on the contributions made to the funds and withdrawals of accumulations.
But the government had made changes to the tax advantages available for employers and employees for contributions to the EPF. From April 1, 2022, the provident funds were divided into taxable and non -taxable accounts.
Under Budget 2021, the government has decided to reduce the tax benefits to target high-income earners who benefit from the EEE scheme.
Here are the ten points that you need to know about EPF:
- Any interest on contributions made towards EPF of an employee only remains tax-free for contributions of up to ₹ 2.5 lakh a year.
- Interest on contributions of over ₹ 2.5 lakh is taxed from the employee yearly.
- The contribution threshold is increased to ₹ 5 lakh if an employer is not contributing towards the EPF of an employee.
- Only the excess contribution above the threshold is taxed, not the total contribution itself.
- The excess contributions and interest accrued on it will be maintained in a separate account with the EPFO.
- Employer’s contribution to Provident Fund (PF), NPS and superannuation aggregating to a total sum of ₹ 7.5 lakh a year is exempt from taxes.
- Since employers will withhold taxes based on accruals, these details must be filled in Form 16 and Form 12BA.
- Employers must mandatorily provide EPF contributions for employees whose monthly income is up to ₹ 15,000.
- Taxes withheld in such a manner need to be reported by employees as “Income from other sources.”
- The EPFO has reduced the interest rate to a four-decade low of 8.1 per cent for FY 2021-22.