New PF RULES,2021
An investment fund where contribution is by employees, employers, and (sometimes) the state, out of which a lump sum is provided to each employee on retirement as their retirement benefit.
Let us analyses the change in situation in Budget 2021.
Provident fund after Covid-19 has left many employees in problems due to introduction of tax that is made applicable in the interest areas where earlier they were free from any taxability.
The changes can be depicted as follows
Areas that decide the PF Calculation:
- Employees Salary.
- Based on their own contributions.
- Interest earned above 2.5 Lakhs will be taxed as per one slab, as similar to interest on bank deposits. Thus this leads to rise in employee taxability issues, post Covid.
- The percentage of Employees Salary for PF is 12% and so if your basic salary increases by 1.75 laks per annum, then chances of taxability arises.
- In case of own contributions which employee’s do for tax free returns also ensures that the total Interest amount shall not exceed 2.5 lakhs per annum.
- Tax escaping chances in employee salary case is that, if the amount is diverted to NPS, then it would not be taxed.
The PF rules have impacted for an employee in different direction.
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