EPFO Big Update! Rules Around TDS On Interest Changed:
Employees’ Provident Fund Organisation (EPFO) has notified a new change in the rules around tax applicable on the interest earned. According to a report by Businessline, if a person has made a contribution of Rs 2.5 lakh or more in their EPF account in a year, they will be liable to pay tax on the interest earned even in the case of death. The contributors will be charged a 10 per cent Tax Deducted At Source (TDS) on the interest earned.
Also, if the person has not linked the PAN card to the EPF account, they will have to pay double the TDS of 20 per cent. However, this is valid only if the contributions are made after April 1, 2021. The new rules have come into effect from April 1, 2022. The government recently changed the EPFO interest rates to 8.1 per cent from 8.5 per cent earlier.
In Budget 2022, Finance Minister Nirmala Sitharaman kept the exemption limit at Rs 2.5 lakh per year. According to the report, the TDS will be charged even if the person has passed away during the year. The contributions made or to be made must be exceeding Rs 2.5 lakh.
How will taxation work?
- If a person had contributed more than Rs 2.5 lakh in a year to their EPF, the tax will be levied on the exceeding amount as well as the interest accrued on it.
- For people who have linked a valid PAN card to their EPF account, the TDS will be 10 per cent. Otherwise, it will be 20 per cent.
- In the case of the General Provident Fund (GPF), the limit of tax-free contribution is Rs 5 lakh per year.
