PF threshold limit raised to Rs. 5 lakhs for tax-free interest

PF threshold limit raised to Rs 5 lakh for tax-free interest where there is no contribution by employer. In the Union Budget 2021, FM had provided that interest on employee contributions to provident fund over Rs 2.5 lakh per annum would be taxed from 1st April, 2021.

FM had capped the tax-free interest earned on provident fund contribution by employees and employers together to a maximum of Rs 2.5 lakh in a year in an attempt to dissuade high earners from parking their surplus in what is supposed to be common man’s retirement fund.

Exemption is Conditional  

This exemption, however, is subject to condition that the up to Rs 5 lakh contribution does not include employer’s contribution beyond the statutory limit of up to 12 per cent of the basic pay.

Source: News Articles

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