PF contribution above ₹2.5 lakh? EPFO new guidelines

In the latest move, the Employees’ Provident Fund Organisation (EPFO) has released fresh guidelines regards to taxes and deductions on interest earned on EPF accounts. The government’s statutory body has announced a new structure of tax deducted at source (TDS) on provident contributions above ₹2.5 lakh annually for the private sector employees. While the taxation threshold is modified to a contribution of ₹5 lakh to government employees.

This threshold limit for government and private sector employees is on contributions for the previous year 2021-22 and subsequent previous years.

Under the new guidelines which were issued on April 6, EPFO directs that TDS will be deducted on the date of credit of interest on the EPF account if the case does not include a final settlement or transfer. Meanwhile, TDS will be applicable in case of PF final settlement, transfer claims on transfer from exempted establishments to EPFO, and vice versa.

EPFO also said that the TDS will be applicable in case of death as it is for a live member. Also, TDS is the same for international workers as it is for Indian workers.

For Indian residents, if a PF account is linked with a valid PAN card, then the rate of TDS will be 10%, however, if the account is not linked with PAN then the taxable rate will double to 20%.

However, if the TDS amount is ₹5,000, then no deductions will be made on interest credited to a resident, however, the member’s individual tax Liability towards his total tax shall remain.

In the case of a non-resident, the TDS will be deducted at 30% as specified under the Double Taxation Avoidance Agreement (DTAA) if the PF account is linked with a valid PAN. However, the rate is also 30% if not linked with PAN or has an invalid PAN.

However, there is a 4% cess of TDS applicable to non-residents. Further, the surcharge on NRIs’ interest above ₹50 lakh to ₹1 crore, is 10%, while it is 15% on interest above ₹1 crore to ₹2 crore. The surcharge is 25% if the interest is above ₹2 crore to ₹5 crore, and 37% on interest above ₹5 crore to ₹10 crore and exceeding ₹10 crore. There will be no surcharge on interest above ₹50 lakh.

These new guidelines have come into effect from April 1, 2022.