The Central Board of Direct Taxes (CBDT) notification says, if an employee contributes over Rs2.5 lakh in a monetary year to Employee Provident Fund (EPF), then the employee will probably be required to keep two PF accounts starting from this fiscal year.
In respect of this, a set of guidelines have been issued following the introduction of a brand new provision in Budget 2021. The two PF accounts will keep non-taxable and taxable contributions individually to ease the way of calculation for the taxpayer.
As per the notification, the rule will kick in from 2021-22 financial year, so contributions made until 31st March 2021 are non-taxable. In case, if you don’t get an employer contribution, the limit is ₹5 lakh.
What Sudhir Kaushik Says Against Having Two PF Accounts?
Sudhir Kaushik, co-founder and CEO, Taxspanner, stated that the second account related to taxable contribution will open mechanically. “An account holder or an employer will not be in a position to open this account on his personal. By the regulation, the onus is on the PF authorities to keep up it.”
The notification states that the non-taxable account will include the closing of your PF account as of 31st March 2021, which contribute to the threshold restriction in 2021-22, within the following years and the accrued curiosity. However, the payable tax will calculate after deducting withdrawals from the taxable account.
He also said that this transfer is geared towards rationalizing PF taxation to carry it on a par with different funding choices. Buyers must think about the available funding options, equivalent to NPS, which is not completely tax-friendly but able to get higher returns in comparison with PF.