From April 1, there will be a significant change in the rules related to PF. In fact, the General Budget 2021 provides for a tax exemption limit for interest on Employees Provident Fund (EPF) and Voluntary Provident Fund (VPF). This means that the interest on provident fund contributions above Rs 2.5 lakh a year will now be taxed by normal rates. This will only apply to the contribution of the employees, not the contribution of the employee (company). This rule will be applicable from 1 April. Actually, the employees should save tax by depositing more money in PF because till now the interest of PF was outside the purview of tax.

High-Income Salaries Will Affect
Employees Under the current provisions, the Employees Provident Fund, Voluntary Provident Fund and Exempted Provident Fund Trusts are exempt from tax, regardless of how high the PF contribution is. This new provision of the budget will have a direct impact on people with high-income salary, who use the voluntary provident fund for tax-free interest. Under the EPF Act, employees and employee contribution (contribution of the company) is fixed at 12% of salary. However, employees can voluntarily contribute more than this amount to the Voluntary Provident Fund (VPF). VPF has no upper limit for contribution.

Benefit of exemption on full interest without any limit
Delhi’s Chartered Accountancy Govind Singh said that some employees contribute higher amount in provident funds (central government funds like Recognized Provident Fund and EPF) and rebate on full interest without any limit Take advantage of In the budget proposal, the finance minister has proposed a rebate on interest on PF contribution up to Rs 2.5 lakhs in a year. The new limit will apply to contributions made on or after 1 April 2021. This move will have an impact on less than 1 percent of employees of Employees Provident Fund.


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