New revenue tax guidelines for GPF from 1st April 2022 that you need to know

New revenue tax guidelines for GPF: After the start of latest monetary yr 2022-23, varied revenue tax norms introduced within the union finances 2022 have turn out to be relevant now. So, it will be significant for a taxpayer to know the brand new modifications in regard to revenue tax rule, which has turn out to be relevant now. Taxation on Provident Fund (PF) contributions above ₹2.50 Lakh is certainly one of them. After rationalization of provident fund introduced in finances 2021, the Central Board of Direct Taxes (CBDT) has inserted rule 9D of Income Tax Rules, 1962 in FY22. Under this rule, every EPFO subscriber may have two PF/EPF account the place the second account may have PF contribution past the brink restrict.

Speaking on the brand new revenue tax guidelines for GPF or General Provident Fund; SEBI registered tax and funding professional Jitendra Solanki stated, “In budget 2021, the union finance minister had announced to rationalization provident fund by taxing the PF interest earned beyond ₹2.50 lakh contribution in single financial year. To ensure implementation of this announcement and smooth calculation of the PF interest earned by an EPFO subscriber, CBDT inserted rule 9 of Income Tax Rules, 1962 in FY2021-22. As per this rule, every EPFO subscriber will have two EPF or PF account where PF contribution beyond ₹2.50 lakh in single financial year will be deposited in second PF or EPF account. So, interest earned in EPF/PF-1 account will be free from any taxation while interest earned in PF/EPF-2 account will be taxable.” Solanki stated that two EPF or PF account system has turn out to be relevant from the brand new monetary yr. However, classification of taxable and non-taxable PF account will get in place from 1st April 2021.

Explaining the brand new revenue tax guidelines for GPF; Archit Gupta, Founder and CEO at Clear stated, “The CBDT has notified that organisations need to maintain two separate PF accounts. One of the accounts will be for taxable contributions, while the other will be for non-taxable contributions starting 1st April 2021. The interest accrued on the contributions deposited in the taxable account in the EPF will be taxed.”

On how new revenue tax guidelines on provident fund contribution will work, Archit Gupta of Clear stated, “The interest earned on the employee’s contribution to the provident fund account will be taxed if the contribution amount in a financial year exceeds ₹2.5 lakh. If there is no employer contribution in the provident fund account, the threshold will be ₹5 lakh a year.”

For instance, a salaried EPFO subscriber makes a contribution of ₹1.5 lakh in EPF and ₹1.5 lakh in VPF accounts through the FY 2021-22. The opening stability of the PF account as of 1st April 2021 is ₹20 lakh. The complete contribution to the provident fund account through the FY 2021-22 is ₹3 lakh. Hence, ₹2.5 lakh EPF contribution can be credited to the non-taxable account, and ₹50,000 can be credited to the taxable account. The stability within the non-taxable account as of thirty first March 2022 shall be ₹22.5 lakh (the opening stability as of 1st April 2021 is non-taxable), and within the taxable account shall be ₹50,000. Therefore, the curiosity of 8.5 per cent relevant for FY 2021-22 on ₹50,000 shall be taxable into the palms of EPFO subscriber.

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