Particularly if the amount deposited in the PF account is above 2.5 lakh then the interest amount is applicable for tax.
The PF account holders whose contribution is below Rs.2.5 lakh in a fiscal year, are applicable for tax under this scheme.
What Exactly The Amount Of Rs.2.5 Lakh Denotes?
Simply learn that as per EPFO rule, if you deposit the amount of more than Rs.2.5 Lakh in your PF account.
Then you are tax liable for the interest earned on the above amount only.
For example, if you deposit Rs.3 Lakh in your account, then you will have to pay the tax for the interest earned on Rs.1 Lakh.
On the other hand, the government has provided relaxation to the employees whose employer does not contribute. For them, the amount limit is Rs.5 Lakh.
What Happens If You Have Already Deposit?
If you have Rs.5 Lakh already deposited in your account then, you are not liable for any tax deductions. This amount will be served in a non-taxable account.
But if the second deposit amount exceeds Rs.2.5 lakh then you will have to pay tax on interest earned for the exceeding amount.
Reason For EPFO Taxation Rule
Since there were no tax deductions on the amount the PF account holders deposited, they were taking advantage.
They were depositing huge amounts in crores, to their PF accounts as contributions. So that they can earn the maximum interest & also keep their money out of tax radar.
