Provident Fund Alert: In a major update for PF subscribers, the Central government on Thursday Issued a notification and said that the new income tax rules under which the existing provident fund (PF) accounts will be split into two separate accounts. In the fresh notification, the Central government added that the move will enable the government to tax PF income generating from employee contributions that exceed Rs 2.5 lakh annually.
In this regard, the Central Board of Direct Taxes (CBDT) has issued rules and stated that separate accounts within the PF account shall be maintained. It also added that the existing employees provident fund (EPF) accounts will be divided into taxable and non-taxable contribution accounts.
As per the CBDT, the non-taxable accounts will include their closing account as it stood on March 31, 2021. As per updates, the new rules are likely to come into effect from the next financial year– from April 1, 2022 onwards.
The CBDT said to implement the new tax on PF income from employees’ contributions exceeding Rs 2.5 lakh annually, a new Section 9D in the income tax rules has been included.
It also added that to calculate the taxable interest, two separate accounts will have to be maintained within the existing provident fund account during the recently concluded financial year as well as all the preceding years, to assess the taxable as well as the non-taxable contribution made by a person.
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