Now Reading: EPF interest above Rs 2.5 lakh contribution limit may be taxed
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EPF interest above Rs 2.5 lakh contribution limit may be taxed
Interest on EPF contributions is not always tax-free for high contributors, Mint reports. If an employee’s combined annual contributions, including the employer’s 12% share and any VPF contribution, exceed Rs 2.5 lakh,…
The Story in Brief
Interest on EPF contributions is not always tax-free for high contributors, Mint reports. If an employee’s combined annual contributions, including the employer’s 12% share and any VPF contribution, exceed Rs 2.5 lakh, interest on the excess becomes taxable at the applicable slab rate. The rule has applied since 2022.
VPF lets employees save more than the mandatory EPF amount, without a matching employer contribution. Contributions up to Rs 1.5 lakh may qualify for a Section 80C deduction. Withdrawals after five years are generally exempt, while earlier withdrawals may be taxed. EPF contributions are ordinarily capped at Rs 1,800 each a month for employer and employee, based on the Rs 15,000 monthly wage ceiling. Contributions above it are voluntary unless rules permit otherwise.
The Indian Opinion
Claims that all PF interest remains permanently tax-free are outdated, but warnings that every EPF saver will face a tax bill are equally misleading. The rule targets contributions above Rs 2.5 lakh a year, which mainly affects higher contributors using VPF or larger permitted contributions. Savers should check how their employer calculates the combined amount and the interest split. The key figure is the annual contribution crossing Rs 2.5 lakh.
Source: livemint.com
This story was synthesised by AI from the source linked above.
