Tax on EPF interest: In what way will TDS be deducted?

 The income tax department clearly indicates that the interest that you earn from your provident fund would also be taxed like fixed deposit interest. However, if your interest income is below INR 2.5 lakh, then you don’t have to pay tax for it.

In brief

Budget 2021 brings a great sigh of relief to the income taxpayers. This is because; the income tax rates and slabs are still the same. There is no change in rates and slabs. However, there is a change introduced in this year’s budget. And that is the taxation of the interest earned from the Employee’s provident fund. Further, the government also clearly states that the tax will only be applicable if your interest income is more than INR 2.5 lakh.

However, there is a lot more to be clarified by the finance ministry. It includes how the tax will deduct, what would be the interest rates, and many more.

What part of the Employee’s provident fund is taxable?

Well, coming back to the core of the topic, many readers must have a common doubt. And that is what part of the Employee’s provident fund will be taxable? As per the calculations, if your annual basic salary is close to somewhere around INR 21 lakhs, or you are getting INR 1,73,612 every month, you will come under the tax scheme for EPF. However, you should be very clear that only the excess interest you earn from your Employee’s provident fund would be taxed. And there is nothing to do with your contribution to the Employee’s provident fund.

On the other hand, the central board of indirect taxes also clarifies that this taxation would be similar to fixed deposit interest taxation.



Conclusion

Keeping it short, this is what you should know about the new taxation on EPF interest. Now that you are clear about the tax scheme, you can file it without any hassle. You may contact www.chakdebiz.com for any kind of legal services.

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