Team-BHP - The "Provident Fund" Thread

EPF Interest to be taxed

Link: https://www.financialexpress.com/bud...xable/2184259/

If I understood correct, Interest earned on Employer contribution is not taxable. However, Interest earned on Employee contribution exceeding 2.5 lacs contribution per year is taxable. We will get more clarity in coming days.

Quote:

Originally Posted by sdp1975 (Post 4991428)

:thumbsdown:thumbsdown PF interest above 2.5 lacs made taxable in the budget. Many salaried folks iwll be affected. They could've chosen a higher limit at least

I don't know what they were thinking when they even thought of this. If it irks them that much then change the ROI and bring it closer to the PPF. Just a senseless decision. Does this stay or will this still be under consideration ?

Quote:

Originally Posted by sdp1975 (Post 4991428)

:thumbsdown:thumbsdown PF interest above 2.5 lacs made taxable in the budget. Many salaried folks iwll be affected. They could've chosen a higher limit at least

It is not PF interest above 2.5 lacs, but if the PF contribution exceeds 2.5 lacs during the FY, then it becomes taxable.

One can invest their entire 100% basic as VPF, and get a tax-free ~8.65%. Many employees use VPF for tax-free returns. Even I started VPF recently and contribute 20% of my basic :).

And since this new provision is not retrospective, I personally don't mind it much.

Source

Quote:

Originally Posted by NevGin (Post 4991475)

There was a proposal to tax EPF in the 2015 budget IIRC. It was rolled back after social media uproar. So protest against it wherever possible and the provision may be diluted or rolled back.

I left my previous employer in 2004, before UAN or mobile or Aadhar linking was there. The account is in inoperative state now as it was not transferred to my current PF account.

When I tried to do online transfer/merge of the two, the EPF website says my previous account and current details does not match. There isn't any more details.

There could be mismatch of a alphabet in my name or my father's name or maybe due to mobile number missing.

Now what are my options to bring that money to my current PF account?

Let me know if anyone faced this.

I am dumb with taxation and all. Here, does it mean that say I have put Rs. 2,50,100 (2 lakh 50 Thousand One Rupees) in one year through my personal contribution to EPF and VPF, the interest earned on Rs. 100 at whatever percent (~8%) is taxable?

But the interest on Rs. 2.5 Lakh is not?

Quote:

Originally Posted by fordday (Post 4991507)

Now what are my options to bring that money to my current PF account?

Let me know if anyone faced this.

I have the exact same problem and I also am interested if anybody has a resolution.

Quote:

Originally Posted by raksrules (Post 4991520)

The article in FE states in the last para :
"This means, going forward, the interest earned on your PF balance if the contribution exceeds Rs 2.5 lakh in a year will be taxable."

It could also be interpreted that the threshold of Rs 2.5 lakh in a year will be the qualifier to determine whether the entire interest is taxable or not. Further clarity would follow only in the days to come.

Quote:

Originally Posted by joslicx (Post 4991586)

I have the exact same problem and I also am interested if anybody has a resolution.

Go to your previous employer and get the paper transfer forms endorsed - and file with your new employer. If the old employer is defunct contact the previous pf office for assistance. All pf offices have a help desk where you can ask them the best way to proceed.

Quote:

Originally Posted by raksrules (Post 4991520)

Please read this, should clarify.

https://freefincal.com/how-employee-...xed-like-a-fd/

Also quoting:

Quote:

Assume that your EPF balance as on 31st March 2020 is Rs. 10,00,000. The employer contribution is, Rs. 20,000 a month; The employee contribution is Rs. 20,000 a month or Rs. 2,40,000 a year (FY).
In this case, there is no change in rule and nothing need to be done. Suppose the employee decided to invest via VPF Rs. 5000 a month. The total annual contribution by the employee is (5000 x 12) + 2,40,000 = 3,00,000.

If the EPF rate is say 8% then 8% of (3,00,000 – 2,50,000) = Rs. 4000 should be shown as income while filing ITR and this will be taxed as per slab rate.

Further compounding of this interest in future years will not be taxed as pointed out in the above article.

Another explanation from ET,

Quote:

Because if your PF contribution is above Rs 2.5 lakh annually, interest earned on the additional amount will be taxable. So, let’s say you have an annual salary income of Rs 50 lakh. Typically, about half or Rs 25 lakh would be your basic salary. Your contribution to PF at 12% of basic pay would be Rs 3 lakh. Earlier, the interest earned on all of it would be tax exempt.

https://economictimes.indiatimes.com...w/80642321.cms

Quote:

Originally Posted by Turbohead (Post 4994872)

A dear relative of mine has a question for you all:

Do look up the previous posts - I think it's not directly on the interest earned but on the annual PF contribution being > 2.5 lakh rupees. So, one pays Income tax on the interest earned on PF contribution amount exceeding 2.5 lakhs.

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Now, I have a question too - if one has both PF (EPF) contribution as well as PPF, will the cumulative amount of both be considered for the 2.5 lakh rupees contribution ?

Quote:

Originally Posted by NPV (Post 4994876)

Now, I have a question too - if one has both PF (EPF) contribution as well as PPF, will the cumulative amount of both be considered for the 2.5 lakh rupees contribution ?

No. This is only for EPF.

PPF continues to be tax-free with a max permissible contribution of 1.5 lacs per fiscal year.