Employees PF Changes Budget 2021

Hi,

What are the details of the newly proposed plans to dis-allow deduction of employee’s PF contribution for employers in budget 2021?

Please share more details .

Thanks.

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Hi @Nisha

There is no impact for those contributing up to Rs 20,833 pm, which means “Employees having a basic salary up to approximately Rs 1.75 lakh per month would not attract tax on their interest earnings in PF”

As of today, the entire PF contribution earns tax-free return and the PF amount enjoys EEE status. But, from April 1, 2021, the taxation of PF contributions will see a change. The interest earned on contributions above Rs 2.5 lakh per annum will be taxable as per one’s tax slab similar to how interest income from bank fixed deposit is taxed.

If a contribution exceeds Rs 2.5 lakh in a year, the advantage of earning a tax-free return on the entire PF balance will be lost now

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