New EPFO Guidelines explain how PF contributions above Rs 2.50 lakh will be taxed
The Workers’ Fund Foundation (EPFO) has issued new guidance on tax deductions for private sector employees whose contributions to a retirement savings account are more than Rs 2.50 lakh annually. .
In a circular, the EPFO said that the tax threshold for EPF contributions to government employees would be Rs 5 lakh annually. This tax regime comes into effect from April 1 this year. Employees across India are required to have an EPF account.
Circular says TDS will be deducted when interest is paid into EPF account. For pending payments or transfers, TDS will be deducted at a later date in the final settlement.
Do the new instructions mean anything else?
– For those who have not linked PAN to their EPF account, tax will be deducted from their annual income on contributions over Rs 2.5 lakh at the rate of 20 percent. And those who have linked their EPF account to their PAN tax will be charged 10 percent.
– Circular says EPFO will maintain one non-taxable account and one taxable account for all members contributing more than Rs 2.5 lakh.
– However, if the calculated TDS is Rs 5,000 or less, no TDS will be deducted on the interest credited to those EPF accounts.
– For ex-employees and non-resident employees with active EPF accounts in India, tax will be deducted at the rate of 30 percent or as provided for by the Agreement on the Avoidance of Double Taxation between India and India. respective country.
In addition, TDS will be applied to all EPFO members, including members of exempt facilities or exempt trusts.
– TDS rate will stay the same in case EPFO member dies.
Interest earned on the amount in the EPF account is credited annually. But the accounts are maintained monthly. So, if no transfer/final settlement is made during the financial year, then TDS will be deducted from interest payment.
Having one of the largest clients in the world, EPFO currently maintains 24.77 members’ crore accounts.
