• Interest on employee contributions to provident fund of over ₹2.5 lakh per annum would be taxed, starting from 1 April.
• Under the existing tax provisions, interest received/accrued from employee’s provident fund (EPF) is exempt from tax.

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• It is proposed that the interest earned on the EPF contributions (only employee contribution) above ₹2.5 lakh a year will now be taxableKey Points :
  • Up to ₹2.5 lakh has been kept as the deposit limit for which interest is tax exempt, finance minister said.
  • The move is aimed at taxing high-value depositors in the Employees Provident Fund. At least 12% of an employee’s basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%.
  • Anyone who earns more than ₹20.83 lakh a year will attract his or her interest on EPF contribution being taxed.
  • “If employees’ contribution to provident fund on or after 1 April 2021 exceeds ₹2.5 lakh in any year, interest earned on contribution over ₹2.5 lakh shall be taxable.
  • It may be noted that the new provision only takes into account employees’ contribution and not the total contribution to the fund during any year.
  • This will have a limited impact specifically on the high-income salaried individuals

  source : live mint