New income tax rules for GPF from April 1, 2022 to know

New tax rules for GPF: After the start of the new fiscal year 2022-23, various income tax standards announced in the union budget 2022 are now applicable. It is therefore important for a taxpayer to be aware of the new changes regarding the income tax rule, which is now applicable. Taxation on contributions to the Provident Fund (FP) above 2.50 Lakh is one of them. After the Contingency Fund rationalization announced in the 2021 Budget, the Central Board of Direct Taxes (CBDT) inserted Rule 9D of the Income Tax Rules, 1962 into FY22. Under this rule, each subscriber EPFO will have two PF/EPF accounts where the second account will have a PF contribution above the threshold limit.

Speaking on the new tax rules for GPF or Caisse Générale de Prévoyance; SEBI registered tax and investment expert Jitendra Solanki said: “In the 2021 budget, the union finance minister announced the streamlining of the provident fund by taxing PF interest earned beyond Contribution of 2.50 lakh in a single fiscal year. To ensure the implementation of this announcement and a smooth calculation of PF interest earned by an EPFO ​​subscriber, CBDT has inserted Rule 9 of the Income Tax Rules, 1962 into the financial year 2021-22. In accordance with this rule, each EPFO ​​subscriber will have two EPF or PF accounts where the PF contribution beyond 2.50 lakh in a single financial year will be deposited into the second PF or EPF account. Thus, interest earned on the EPF/PF-1 account will be exempt from any taxation while interest earned on the PF/EPF-2 account will be taxable.” Solanki said the two-account EPF or PF system has become applicable. from the new financial year.However, the classification of taxable and non-taxable PF accounts will be implemented from April 1, 2021.

Explain the new income tax rules for GPF; Archit Gupta, Founder and CEO of Clear, said: “The CBDT has notified that organizations must maintain two separate PF accounts. One of the accounts will be for taxable contributions, while the other will be for non-taxable contributions from 1 April 2021. Accrued interest on contributions deposited in the EPF taxable account will be taxed.”

On how the new provident fund contribution tax rules will work, Archit Gupta of Clear said: “Interest earned on the employee’s contribution to the provident fund account will be taxed if the amount of the contribution to the course of a financial year exceeds 2.5 million. If there is no employer contribution to the provident account, the threshold will be 5 million a year.”

For example, a salaried EPFO ​​subscriber pays a contribution of 1.5 lakh in ETH and 1.5 lakh in VPF accounts in FY 2021-22. The opening balance of the PF account on April 1, 2021 is 20,000,000. The total contribution to the provident fund account during the financial year 2021-22 is 3,000,000. Hence, The ETH contribution of 2.5 lakh will be credited to the non-taxable account, and 50,000 will be credited to the taxable account. The non-taxable account balance as of March 31, 2022 will be 22.5 lakh (opening balance on April 1, 2021 is not taxable), and in the taxable account must be 50,000. Consequently, the interest of 8.5% applicable for the financial year 2021-22 on 50,000 are taxable in the hands of the EPFO ​​subscriber.

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