Since the Corona period, many rules of the Employees’ Provident Fund Organization (EPFO) have been changed. If you are also a member of EPFO, then it is important for you to know all those things which you do not know. If you do not do this then you may have to suffer loss.
The Employees’ Provident Fund Organization had announced a reduction in the interest rates of the Employees’ Provident Fund (EPF) this month. For the current financial year 2021-22, the interest rate has been reduced to 8.1 percent. This is a big setback for the employees. Earlier the interest rate on PF was 8.5 percent. However, more interest is still being paid on it as compared to fixed deposits (FDs) of banks. There are some other things which you need to know-
Tax is levied on excess investment
The entire interest earned on Employee Provident Fund (EPF) was earlier tax free. But from April 1, 2021, the central government has changed its rules. Now PF interest is not completely tax free. It is divided into several sections. Investors have to pay different income tax for different classes. According to the changed rules, only investment up to Rs 2.50 lakh annually in the Provident Fund will be tax free. Investments more than this and the interest earned on it will now be considered as income and you will have to pay income tax on that.
There was no tax to be paid on any amount invested before April 2021 and the interest earned on it. That’s why many employees used to deduct PF more than the mandatory limit so that more interest would be available. But now it is not so. If your employer does not contribute to PF, then up to Rs 5 lakh can be invested.
At present, 12 per cent of the basic salary is invested by the employer and 12 per cent by the employee in the Provident Fund. Out of 12 per cent of the employer’s share, 8.33 per cent goes to the Employees’ Pension Scheme. The remaining 3.67 percent amount is deposited in your PF account. No interest is available on the amount given in the pension scheme because the contribution of the investor and the employer is necessary. Monthly pension is given after retirement from this fund.