Homepersonal finance News

    Interest from EPF tax-free till Rs 5 lakh if employer does not contribute

    Interest from EPF tax-free till Rs 5 lakh if employer does not contribute

    Interest from EPF tax-free till Rs 5 lakh if employer does not contribute
    Profile image

    By CNBCTV18.com  IST (Published)

    Mini

    Employees will be taxed on EPF interest if deposits exceed Rs. 2.5 lakh with employer contribution.

    The central government has implemented the new tax and financial rules from April 1, 2021. Among the changes that were introduced was the tax on interest from the Employees' Provident Fund (EPF) and the Voluntary Provident Fund (VPF).
    According to the Finance Act, 2021, when employees make deposits of more than Rs. 2.5 lakh to their EPF or VPF in a single financial year, they’re liable to pay taxes on interest accrued from contributions above Rs 2.5 lakh.
    However, employees do have one avenue of relief. If their employers do not make any contribution to the EPF or VPF deposits, they will be liable to pay taxes only when deposits exceed Rs 5 lakh in a financial year.
    Thus, employed individuals can either deposit up to Rs. 2.5 lakh with employer contribution, or Rs 5 lakh without employer contribution in a financial year, in order to avoid being taxed on interests.
    Individuals can also withdraw money directly from their EPF corpus, but in order to avoid paying tax deducted at source (TDS), the amount being withdrawn must be less than Rs 50,000 with a salary of less than Rs 2.5 lakh a month.
    Under the new rules, beneficiaries also have to mandatorily link their EPF accounts to their Aadhar details in order to continue receiving employer contributions to their EPF accounts.
    Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
    arrow down

      Most Read

      Market Movers

      View All
      CompanyPriceChng%Chng