Centre Notifies Rules to Divide Provident Fund Into Two Accounts — Taxable & Non-Taxable

The finance ministry has notified guidelines for calculation of taxable curiosity on worker contributions to provident fund of over Rs 2.5 lakh every year. In her Budget for 2021-22, Sitharaman had capped the tax-free curiosity earned on provident fund contribution by workers and employers collectively to a most of Rs 2.5 lakh in a yr in an try to dissuade excessive earners from parking their surplus in what is meant to be the widespread man’s retirement fund.

The Central Board of Direct Taxes (CBDT) on Wednesday notified guidelines for calculating taxable curiosity in provident fund. It mentioned for the sake of calculation, separate accounts inside the provident fund account shall be maintained starting 2021-22 for taxable and non-taxable contributions made by an individual.

Nangia & Co LLP Partner Shailesh Kumar mentioned the notification issued by CBDT has lastly put to finish the paradox which arose with the introduction of taxation of curiosity on provident funds with contribution above the desired threshold. Rule 9D inserted within the Income-tax Rules, 1962 has specified that separate accounts inside the PF accounts shall be maintained clearing segregating the taxable and non-taxable contributions to PF together with curiosity thereon.