Key Changes in PF Rules – Quick Overview

Key Changes in PF Rules – Quick Overview

1.      The PF accounts are likely to be divided into taxable and non-taxable contribution accounts under the set of new Income Tax Rules.

2.      This new rule will only apply to the contributions made by the employee, while contributions made by the employer will not be taxed.

3.      In case there is no contribution done by employer to the EPF account then interest will be tax-exempt for the deposit up to 5 Lakh in a financial year.

4.      The new rule will apply to all EPF subscribers: un-exempted establishments, exempted establishments, and exempted trusts.

5.      Those who have not linked their PAN to their EPF accounts will have to pay 20% tax. While for others, the tax will be calculated at 10% rate.

6.      Forms 15G and 15H can be submitted with a valid PAN to reduce the rate at which tax is deducted. In the case of resident Indians, it will not be deducted if the TDS amount is up to Rs 5,000.

7.      In the case of non-resident Indians (NRIs), it will be deducted at the applicable rate, even if TDS amount is up to Rs 5,000.

8.      For the NRIs, the TDS will be 30 per cent. In addition, a 4 per cent cess will also apply. A surcharge will apply if interest earned exceeds Rs 50 lakh, whose rate could range between 10 per cent and 37 per cent, depending on the interest amount.

9.      To implement the new tax on PF income from employees’ contributions exceeding ₹ 2.5 lakh annually, a new Section 9D in the income tax rules has been included.

10.  EPF accounts are mandatory for employees earning up to ₹ 15,000 per month in any firm with over 20 workers.

Disclaimer:  Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.


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