PF Rule 2022: The Income Tax Department will begin levying tax on PF returns from April 1, 2022, said Nirmala Sitharaman in a crucial update for all government & private sector employees.
From April 1, the Central Board of Direct Taxes (CBDT) will begin enforcing the Income Tax (25th Amendment) Rule 2021, which will apply to both the Employee Provident Fund (EPF) and the General Provident Fund (GPF).
In the Union Budget 2021, Finance Minister Nirmala Sitharaman made a surprise announcement. She had set a tax-free contribution cap in the EPF account of up to Rs 2.5 lakh, which means that the interest income earned on top of it will be taxed.
Meanwhile, the cap on tax-free contributions for government employees has been raised to GPF is Rs 5 lakh per annum.
According to the CBDT, income tax will be collected from employees' salaries, which implies that if a private or government employee contributes more than the stated amount, the interest income will be considered income and taxed by the IT department. This tax break will be detailed on Form 16.
It's also been reported that EPFO plans to make certain adjustments to the Provident Fund's guidelines. From April 1, 2022, existing PF accounts can be divided into two pieces.
In this situation, if the employee's contribution exceeds his or her limit, the interest income will be taxed. In reality, the new rules are intended to keep high-income individuals from taking advantage of the system.
