The government argues that the employees who get more salary make a tax free of interest money by depositing a large part in the PF.
On the first day of February, Finance Minister Nirmala Sitharaman made several announcements to improve the economy while presenting the General Budget in Parliament. Also, the Finance Minister had made a big announcement regarding the Employees Provident Fund (EPF). The announcement made by the Finance Minister about PF from April 1 is going to be implemented. This rule will especially affect those who have a higher income and contribute more to the EPF.
People consider PF to be the backbone of their old age. Taxes will now be payable on the interest received by an employee who contributes more than Rs 2.5 lakh in a financial year in PF. Let’s know about it…
How much impact on salary class?
According to experts, till now, whatever contribution was made in the PF was subject to exemption under 80C of income tax up to one and a half lakh. Apart from this, no tax was charged on the interest received on it. But now it will be changed from April 1 and the contribution of PF above 2.5 lakh will now be taxed.
Suppose your contribution to your PF is three lakh rupees, then the amount after 2 lakh 50 thousand will be taxed at about 8.5 percent. Also, 4 percent health and education cess will also be added on it.
Why did the government take this step?
The government believes that an effort has been made to make different methods common. The government argues that the employees who get more salary make a tax free of interest money by depositing a large part in the PF. The government has taken this step to clamp down on such people. Apart from PF, tax is levied on investing that money anywhere.
What does the rule say
According to the rules of the EPF scheme, the employee contributes 12 per cent of the basic salary plus DA to his EPF account every month in his salary. With this, the employer also has to contribute 12 percent equally. So in total, the employee’s EPF account contributes 24 per cent.
Of this total 24 per cent contribution, the employee’s share (12 per cent) and the employer’s 3.67 per cent share goes to the EPF account. While the remaining 8.33 per cent of the employer goes to the Employees Pension Scheme (EPS) account.
Only one percent people will be affected by this
Finance Secretary Ajay Bhushan Pandey said on this decision of the government that this new rule will affect only one percent people. He told that 99 percent of the total taxpayers income is below 20-25 lakhs. In such a situation, they all fall under the ambit of 2.5 lakhs and there will be no additional burden on them. Higher earning people should not be given the benefit of tax money of lower earning people. Therefore, the government has taken this step.
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