There is a piece of good news for all of us. This news is about the new PF limit increased to Rs. 5 Lakhs. The government has increased the annual cap for tax exemption on interest received on employee provident fund contributions to Rs 5 lakh. Therefore, in this article, we will discuss the EPF Or PF in detail. Also, we will understand what you need to know about the New PF Limit Raised To Rs 5 Lakhs.
Acknowledge the EPF or PF
The EPF or PF is the government scheme. In this government scheme, Employees contribute 12% of their basic salary + DA to the EPF. The employer also pays equally to administrative costs, plus an extra 1.36 per cent. Further, It is necessary for all workers with a salary of less than or equal to Rupees fifteen thousand.
Important Note- Any employee contributing to the EPF gets a UAN ( Universal Account Number). Employees can only revoke their EPF after five years of continuous service.
Now that we know what EPF is, let us discuss the good news.
Earlier announcement on PF Limit Increased
Finance Minister Nirmala Sitharaman limited the tax-free interest received on provident fund contributions by workers and employers combined to a limit of Rs 2.5 lakh per year in the Budget 2021-22.
The government suggested the reform to mitigate HNIs and high-income earners from putting their extra money into the provident fund. The reason is PF’s motive is to be a common man’s retirement fund.
New PF Limit Raised
However, Sitharaman stated that the government now increases the tax-free threshold to a maximum of Rs 5 lakh per year. She announced it while responding to a debate in the Indian Parliament on the Budget Bill 2021.
In addition, this exemption is conditional on the contribution of up to five lakh rupees, not including employer contributions in excess of the statutory cap of up to 12percent of basic salary.
What does this imply?
This announcement implies that an employee can now invest INR five lac to his or her provident fund on a yearly basis plus receive a tax-free return upon this.
although this benefit is conditional on the employer’s contribution not exceeding the statutory cap of up to 12% of basic pay being included in the Rs 5 lakh contribution.
As a result, The higher EPF contribution threshold would favour the country’s middle and high-income earners.
Provident Funds Advantages
- EPF facilitates savings.
- It also aids in the transition to a post-retirement life and helps to finance retirement.
- You are exempt from paying taxes.
- In contrast to other schemes, the interest rate is remarkable.
- You don’t have to spend a large amount of money all at once.
- EPF comes in handy as a financial backup when unemployed.
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