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Provident Fund break up up into Taxable and Non-Taxable Accounts


On this weblog, we are going to talk about the Worker Provident fund break up up into taxable and non-taxable accounts.

Index:

As per the Central Board of Direct Tax (CBDT), curiosity earned on staff’ EPF contributions exceeding Rs.2.5 lakh yearly might be taxable. The edge has been set as Rs.5 Lakh for presidency staff.

Based on the brand new guidelines of CBDT, Provident fund break up into two separate accounts, taxable and non-taxable accounts. That is to allow the federal government’s new EPF tax revenue, generated from the contribution of the Worker that exceeds 2.5 lacks yearly.

Let’s have a look at the important thing factors of EPF accounts –

Key Factors –

  • All current accounts of the Provident Fund break up up into two elements, taxable and non-taxable accounts.
  • The brand new tax is on EPF curiosity on worker contributions exceeding Rs.2.5 lakh every year.
  • The foundations got here into impact from the date of April 1st, 2022.
  • As per the CBDT, the non-taxable accounts will embody closing accounts until March thirty first, 2021.
  • For the calculation of taxable curiosity, these two accounts might be maintained throughout the current PF account in the course of the monetary 12 months and the previous 12 months, for assessing the taxable and non-taxable contribution made by the Worker.
  • EPF is obligatory for workers incomes as much as Rs.15,000 PM in any group with greater than 20 staff working.
  • Each employer deducts 12% of the essential wage as EPF contribution per 30 days.

Guidelines of EPF’s Taxability –

The next are the foundations for employer and worker –

Guidelines for Employer

  • The employer contribution to the P.F. of the Worker is exempt as much as 12% of the wage.
  • Employer contributions in the direction of Provident Fund (PF), NPS, and superannuation above Rs.7.5 lakh p.a might be taxable as a perquisite within the hand of the Worker.
  • The employer has to offer the main points of accrual and taxes withheld in Kind 12BA and Kind 16 and has to challenge it to the Worker.

Guidelines for Worker

  • Any curiosity on Worker’s contribution to PF as much as Rs.2.5 lakh P. A is exempted.
  • Any curiosity earned on Worker’s contribution for greater than Rs.2.5 lakh p.a might be taxable within the fingers of the worker for the 12 months.
  • The surplus contribution of Rs.2.5 lakh with curiosity accrued might be maintained individually.
  • These two separate accounts for taxation will preserve by the Regional Provident Fund Commissioner (RPFC). The RPFC shall deduct TDS on such curiosity paid on the account sustaining taxable contribution.
  • The edge of Rs.2.5 lakh is elevated to five lakhs in case the employer shouldn’t be contributing in the direction of the EPF.

How taxable and non-taxable accounts will work?

Based on CBDT, Worker Provident Fund break up up into Taxable and Non-Taxable accounts, which got here into impact on April 1st, 2022, with the brand new format. Let’s; see the way it will work.

Contribution of Taxable Account –

  1. Employer contributions produced from the monetary 12 months 2021-2022 onward which is greater than the brink of Rs.2.5 Lakh

Add: Worker contribution from the FY 2021-22 which is greater than Rs.2.5 Lakh.

Add: Curiosity accrued underneath taxable contribution account which might be taxable within the hand of the Worker underneath the Head “Revenue from Different sources”.

Much less: Any withdrawal from the account within the 12 months.

Contribution of Non-Taxable Account –

  1. The worker contribution until the FY 2020-21 i.e. thirty first March 2021 might be proven underneath the Non-taxable account underneath the closing stability in your PF account.

Add: Worker contribution from the FY 2021-22 which is lower than Rs.2.5 Lakh.

Add: Curiosity accrued underneath non-taxable contribution account.

Much less: Any withdrawal from the account within the 12 months.

As per the issued round of EPF, we are going to perceive the calculation of Taxable and Non-Taxable with an instance –

For the FY 2021-22

Ms. Neharika is contributing 50,000 P.M. to her EPF account and her opening stability as of thirty first March 2021 was Rs.3,00,000 and the speed of curiosity is 8.1% P.A.

Calculation of Taxable and Non-Taxable

Paid in month Month-to-month contribution Cumulative stability on the finish of the month Complete Curiosity @8.1% p.a on finish stability Curiosity on Non – Taxable A/c Curiosity Taxable A/c
Non-Taxable A/c Taxable A/c
April 2021 50,000 50,000 338 338
Could 2021 50,000 1,00,000 675 675
June 2021 50,000 1,50,000 1,013 1,013
July 2021 50,000 2,00,000 1350 1350
Aug 2021 50,000 2,50,000 1688 1688
Sep 2021 50,000 2,50,000 50,000 2025 1688 338
Oct 2021 50,000 2,50,000 100,000 2363 1688 675
Nov 2021 50,000 2,50,000 1,50,000 2700 1688 1013
Dec 2021 50,000 2,50,000 200,000 3038 1688 1350
Jan 2022 50,000 2,50,000 2,50,000 3375 1688 1688
Feb 2022 50,000 2,50,000 300,000 3713 1688 2025
Mar 2022 50,000 2,50,000 3,50,000 4050 1688 2363
Complete 6,00,000 2,50,000 3,50,000 26325 16,875 9,450

Out there quantity underneath the taxable and non-table accounts and tax implication as on thirty first March 2022 –

Sl.No. Explicit Non-Taxable A/c (₹) Taxable A/c (₹)
1. Closing stability as on thirty first march 2021 300,000 Nil
2. Curiosity Accrued on Opening Steadiness 24300 Nil
3. Contribution in the course of the 12 months 250,000 350000
4. Curiosity accrued in the course of the 12 months 16,875 9,450
5. Complete quantity of contribution throughout 12 months FY 2021-22 5,91,175 3,59,450
6. TDS @10% in case PAN is on the market and linked with Aadhaar. NIL 945
7. TDS @20% the place PAN shouldn’t be accessible and never linked with Aadhaar. NIL NIL
8. TDS @30% in case of Non-resident (topic to DTAA) NIL NIL
The whole accessible quantity for the accounts (Finish of the 12 months 2021-22) 5,91,175 3,58,505

The whole quantity accessible in Ms. Neharika’s EPF account as on 01/04/2022.

  1. IN NON-TAXABLE ACCOUNT – RS. 5,91,175
  2. IN TAXABLE ACCOUNT – RS. 3,58,505
  3. TDS IN HER AIS/26AS – RS. 945

TOTAL EPF BALANCE – RS. 9,49,680/-

For the FY 2022-23

Ms. Neharika is contributing 50,000 P.M. to her EPF account and her opening stability as of thirty first March 2022 was Rs.9,49,680 and the speed of curiosity is 8.1% P.A.

Calculation of Taxable and Non-Taxable

Paid in month Month-to-month contribution Cumulative stability on the finish of the month Complete Curiosity @8.1% p.a on finish stability Curiosity on Non – Taxable A/c Curiosity Taxable A/c
Non-Taxable A/c Taxable A/c
April 2022 50,000 50,000 338 338
Could 2022 50,000 1,00,000 675 675
June 2022 50,000 1,50,000 1,013 1,013
July 2022 50,000 2,00,000 1350 1350
Aug 2022 50,000 2,50,000 1688 1688
Sep 2022 50,000 2,50,000 50,000 2025 1688 338
Oct 2022 50,000 2,50,000 100,000 2363 1688 675
Nov 2022 50,000 2,50,000 1,50,000 2700 1688 1013
Dec 2022 50,000 2,50,000 200,000 3038 1688 1350
Jan 2023 50,000 2,50,000 2,50,000 3375 1688 1688
Feb 2023 50,000 2,50,000 300,000 3713 1688 2025
Mar 2023 50,000 2,50,000 3,50,000 4050 1688 2363
Complete 6,00,000 2,50,000 3,50,000 26325 16,875 9,450

Out there quantity underneath the taxable and non-table accounts and tax implication as on thirty first March 2023 –

Sl.No. Explicit Non-Taxable A/c (₹) Taxable A/c (₹)
1. Opening stability as on thirty first march 2023 5,91,175 3,58,505
2. Curiosity Accrued on Opening Steadiness 47,885 29,039
3. Contribution in the course of the 12 months 2,50,000 3,50,000
4. Curiosity accrued in the course of the 12 months 16,875 9,450
5. Complete quantity of contribution throughout 12 months FY 2021-22 9,05,935 7,37,544
6. TDS @10% in case PAN is on the market and linked with Aadhaar. NIL 3,849
7. TDS @20% the place PAN shouldn’t be accessible and never linked with Aadhaar. NIL NIL
8. TDS @30% in case of Non-resident (topic to DTAA) NIL NIL
The whole accessible quantity for the accounts (Finish of the 12 months 2021-22) 9,05,935 7,33,695

The whole quantity accessible in Ms. Neharika’s EPF account as on 01/04/2023.

  1. IN NON-TAXABLE ACCOUNT – RS. 9,05,935
  2. IN TAXABLE ACCOUNT – RS. 7,33,695
  3. TDS IN HER AIS/26AS – RS. 3849

TOTAL EPF BALANCE – RS. 16,39,630/-

For the FY 2022-23 WHEN SOME AMOUNT IS WITHDRAWN FROM EPF ACCOUNT

Ms. Neharika is contributing 50,000 P.M. to her EPF account and her opening stability as of thirty first March 2022 was Rs.9,49,680 and the speed of curiosity is 8.1% P.A. Let’s contemplate that she has withdrawn Rs. 3,00,000/- as an advance on twentieth December 2022.

Calculation of Taxable and Non-Taxable

Paid in month Month-to-month contribution Cumulative stability on the finish of the Complete Curiosity @8.1% p.a on finish stability Curiosity on nON-Taxable A/C Curiosity on Taxable A/C
April 2022 50,000 50,000 338 338
Could 2022 50,000 1,00,000 675 675
June 2022 50,000 1,50,000 1,013 1,013
July 2022 50,000 2,00,000 1,350 1,350
Aug 2022 50,000 2,50,000 1,688 1,688
Sep 2022 50,000 2,50,000 50,000 2,025 1,688 338
Oct 2022 50,000 2,50,000 1,00,000 2,363 1,688 675
Nov 2022 50,000 2,50,000 1,50,000 2,700 1,688 1,013
Dec 2022 50,000 2,50,000 2,00,000 3,038 1,688 1,350
Withdrawal 3,00,000 -1,00,000 -2,00,000
Jan 2022 50,000 2,00,000 1,350 1,350
Feb 2022 50,000 2,50,000 1668 1,688
March 2022 50,000 2,50,000 50,000 2,025 1,688 338
Complete 6,00,000 2,50,00 50,000 20,256 16542 3714

Out there quantity underneath the taxable and non-table accounts and tax implication as on thirty first March 2023 –

Sl.No. Explicit Non-Taxable A/c (₹) Taxable A/c (₹)
1. Opening stability as on thirty first march 2023 5,91,175 3,58,505
2. Curiosity Accrued on Opening Steadiness 47,885 29,039
3. Contribution in the course of the 12 months 2,50,000 50,000
4. Curiosity accrued in the course of the 12 months 16542 3714
5. Complete quantity of contribution throughout 12 months FY 2021-22 9,05,602 4,41,258
6. TDS @10% in case PAN is on the market and linked with Aadhaar. NIL 3,276
7. TDS @20% the place PAN shouldn’t be accessible and never linked with Aadhaar. NIL NIL
8. TDS @30% in case of Non-resident (topic to DTAA) NIL NIL
The whole accessible quantity for the accounts (Finish of the 12 months 2021-22) 9,05,602 4,37,982

The whole quantity accessible in Ms. Neharika’s EPF account as on 01/04/2023.

  1. IN NON-TAXABLE ACCOUNT – RS. 9,05,602
  2. IN TAXABLE ACCOUNT – RS. 4,37,982
  3. TDS IN HER AIS/26AS – RS. 3,276

TOTAL EPF BALANCE – RS. 13,43,584/-

Word: The quantity withdrawn in the course of the 12 months was Rs. 3,00,000/-

That is the top of our dialogue on the Provident Fund break up up into taxable and non-taxable accounts. Let’s know your different questions and opinions on this subject. Point out beneath the remark field.

To know extra particulars about EPF, learn our associated posts – Worker Provident Fund

EPF contribution is now taxable for the worker

Worker Provident guidelines for employer

New guidelines for PF deduction and contribution

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