EPF VPF deposits tax

Hi community,

need a quick clarity related to tax on EPF and VPF exceeding Rs. 2.5 Lakh.
When will be taxed? Is it at end of every financial year when interest gets credited to PF account or at the time of withdrawal?

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So starting from April 1, 2021, if you are contributing more than Rs 2.5 lakh to your provident fund then the excess interest on the contribution above Rs 2.5 lakh will be taxed under the head “Income from other Sources” at the applicable slab rates based on the method of accounting (accrual or receipt) followed by the taxpayer on a regular basis

(a) This interest taxability shall be applicable only for the contribution made on or after April 1, 2021.
(b) The employee’s principal contribution, employer’s contribution, entire interest earned on employers’ contribution, and interest earned by the employee till 31st March 2021 are not taxable
(c) The interest income earned on excess contribution will be taxable only in those cases where the employees’ annual PF contribution exceeds Rs. 2, 50,000/-.
(d) The contribution to PPF is already restricted to Rs. 1.5 lakhs p.a. currently, so this amendment will not have any impact on PPF contribution.”

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