Salaried Employees: The central government had announced in Budget 2021 that if more than 2.5 lakh rupees are being invested in your EPF account, then you will have to pay tax on the interest received from the additional investment because the employer also has his own Contributes on behalf of the Center has made some amendments in the Finance Bill.
Finance Bill 2021 has been passed in the Lok Sabha (Lok Sabha), the lower house of Parliament. In this, the Central Government has also made some amendments. The central government has increased the tax exemption limit to 5 lakh rupees on the interest received on the amount invested in the provident fund. However, this exemption will be available only to employees whose company does not contribute to the PF. Finance Minister Nirmala Sitharaman said that this would affect only 1 percent of the people investing in provident funds. Also said that the contribution of the remaining people in the PF is less than 2.5 lakh rupees.
Salaried Employees: Discount will be given on investing in VPF and PPF
The Union Government had announced in the Union Budget 2021 that if more than 2.5 lakh rupees are being invested in your EPF account, then you will have to pay tax on the interest received from the additional investment. Because the employer also contributes on his own behalf (Employer Contribution). At the same time, if you invest in Voluntary Provident Fund (VPF) and Public Provident Fund (PPF) in addition to the fixed 12 percent, you can get tax exemption on the interest on the total PF investment up to Rs 5 lakh.
New system has more impact on people with higher income
The people who took advantage of tax exemption by contributing more to the PF were severely shocked by the announcements of the Budget 2021. People earning well used to use PF as a tax-free haven till now, but this exemption was limited in Budget 2021. Under the new system, the interest received on depositing more than 2.5 lakh provident funds in a year was to come under the tax net. High-income salaried people were directly affected by this, who used to use PF to earn tax-free interest