The Centre has notified new revenue tax guidelines underneath which the present provident fund (PF) accounts can be break up into two separate accounts, to allow the federal government to tax PF revenue producing from worker contributions which exceed Rs 2.5 lakh yearly.
Central Board of Direct Taxes (CBDT) has issued the foundations and separate accounts throughout the PF account shall be maintained.
Subsequently, all current staff provident fund (EPF) accounts can be divided into taxable and non-taxable contribution accounts.
The non-taxable accounts will embrace their closing account because it stood on March 31, 2021.
The Finance Ministry had notified the brand new guidelines on August 31 and subsequently the Income Tax division too was knowledgeable.
According to official sources, these guidelines are more likely to come into impact from the following monetary yr, i.e. from April 1, 2022 onwards.
In order to implement the brand new tax on PF revenue from staff’ contributions exceeding Rs 2.5 lakh yearly, a brand new Section 9D within the revenue tax guidelines has been included.
To calculate the taxable curiosity, two separate accounts must be maintained throughout the current provident fund account through the not too long ago concluded monetary yr in addition to all of the previous years, to evaluate the taxable in addition to the non-taxable contribution made by an individual.