Could an excess contribution to the PF(PF+VPF put together) above 2.5 lakhs in one FY be taxable in a subsequent FY? The question is why because the excess amount which is invested in the existing FY shall remain in PF account. Whether government shall continue to levy tax on that excess amount? Please be kind to explain sir.
Answer: Tushant January 6, 2022 Answer:
It has been announced in the Budget 2021 that interest on EPF and VPF contributions above Rs 2.5 lakh or Rs 5 lakh (as the case may be), in a F.Y. will be taxable, for contribution made on or after April 1, 2021.
CBDT has vide Income-tax (25th Amendment) Rules, 2021 (Notification No. 95/2021 dated 31.08.2021) notified the rules regarding calculation of taxable interest on the excess EPF contributions.
The said notification prescribes that separate accounts within the provident fund account shall be maintained during the previous year 2021-2022 and all subsequent previous years for taxable contribution and non-taxable contribution made by a person.
Non-taxable contribution account shall be the aggregate of the following –
(i) closing balance in the account as on 31st day of March 2021;
(ii) Any contribution made by the person in the account during the previous year 2021-2022 and subsequent previous years up to the amount which is not included in the taxable contribution account;
(iii) interest accrued on sub-clause (i) and sub- clause (ii).
Taxable contribution account shall be the aggregate of the following: –
(a) Contribution made by the person in a previous year in the account during the previous year 2021-2022 and subsequent previous years, which is in excess of the threshold limit;
(b) interest accrued on sub- clause (i).
