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

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

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

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

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

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

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