New PF Rule: Upcoming Changes in PF Rules You Must Know

The per new rules for Provident Funds (PF) will change on April 1, 2022. This will have a direct financial impact on Mant Salaried Class Taxpayers.

Subscribers of Employees’ Provident Fund and Voluntary Provident Fund (VPF) who have PF contribution of over Rs 2.5 lakh per financial year will now have two separate PF accounts. These rules will be effective from April 1, 2022.

If you invest more than Rs 2.50 lakh in a PF account in the new fiscal year, you will have to pay tax on the interest. In the Union Budget, Finance Minister Nirmala Sitharaman announced the imposition of a tax on PF investments exceeding Rs 2.50 lakh.

In this regard, the Central Board of Direct Taxes (CBDT) has also issued a notification. If you contribute more than 2.50 lakh to your PF account in a year, you must pay tax on the interest income earned on it. This limit is Rs 5 lakh for government employees. Section 80C of the Income Tax Act exempts investments in PF accounts from taxation.

The reason for creating Two PF accounts is that Tax calculation will be simple.

If a salaried worker’s annual contribution to the PF account exceeds 2.50 lakhs, two separate accounts will be created. The first PF account will receive 2.50 lakh, while the amount above that will be deposited in the second account. This will simplify tax calculation.