All existing PF accounts will be divided into taxable and non-taxable contribution accounts.
New Delhi: From April 1, the existing provident fund (PF) accounts are likely to be divided into two parts. In September last year, the government had notified new Income Tax (IT) rules, under which PF accounts would be divided into two parts. The move will allow the Center to tax PF income on employee contributions above Rs 2.5 lakh annually.
With the new rules, the Center aims to prevent high-income people from taking benefits of government welfare schemes.
Here are the top five takeaways:
1) All existing PF accounts will be divided into taxable and non-taxable contribution accounts.
2) The Central Board of Direct Taxes (CBDT) had said that the non-taxable accounts would include their closing account as it was on March 31, 2021. CBDT formulates policy for the IT department.
3) According to official sources, the rules may come into force from the next financial year i.e. April 1, 2022.
4) A new section 9D has been inserted under IT rules to introduce new tax on PF income from employees’ contribution above Rs 2.5 lakh per annum.
5) For computing the taxable interest, to calculate the taxable as well as non-taxable contribution made by an individual, in the current PF account during the recently ended financial year as well as all the previous years, two separate Separate accounts will be created.
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