New Delhi: Good news for those investing in provident funds. The government has increased the exemption limit on investment interest in PF to Rs 5 lakh. However, these exemptions will be available only to employees whose company does not contribute to the PF. Finance Minister Nirmala Sitharaman said that this would affect only 1 percent of the people investing in provident funds. Along with this, it said that the contribution of the remaining people in PF is less than 2.5 lakh rupees.
Discount will be given for investing
In Budget 2021, the government announced that if more than 2.5 lakh rupees are being invested in your EPF account, then you will have to pay tax on the interest earned from the additional investment because the employer also contributes on its behalf. At the same time, if you invest in Voluntary Provident Fund and Public Provident Fund in addition to the fixed 12%, then you can get a tax rebate on the interest on the total PF investment up to Rs 5 lakh.
People With High-Income Salaries Will Be Directly Affected
Those who took advantage of the tax exemption by contributing more to the PF were severely shocked by the Budget 2021 announcements. At the same time, high-income people used to use PF as a tax-free haven till now, but in Budget 2021, this exemption was limited. Under the new arrangement, the interest received on the deposit of provident fund of more than 2.5 lakh rupees in a year was to come under the tax net. This would have directly affected high-income salaried people, who used PF to earn tax-free interest.
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