Effective April 1, the tax will be imposed on interest earned on the contribution to Employees Provident Fund (EPF) if the amount is in excess of the threshold limit of INR 250,000 every year. This new rule is governed under section 9D of the Income-Tax Act.
For the purpose of calculation, the contribution to the PF accounts up to INR 250,000 is tax-free. But, if an employee contributes in excess of the above-mentioned limit, the tax will be imposed on the interest portion earned on the excess contribution. To calculate the interest that will be taxable in the hands of an employee, a new EPF account will be created, if the EPF contributions in FY 2021-22 exceeds INR 250,000.