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Taxing interest on Provident Fund

  Sep 28, 2021

Taxing interest on Provident Fund

Q  Why is it in News ? 

A. Following its Budget announcement in February, the Finance Ministry has now notified the rules for taxing interest income on contributions made to the Employees’ Provident Fund (EPF) beyond Rs 2.5 lakh (for private-sector employees) and Rs 5 lakh (for government sector employees).

Q  What is Provident Fund?

Q What are various types of provident funds ? 

There are mainly three different types of PFs, which are as follows:

  1. General provident fund: It is a type of PF which is maintained by governmental bodies, including local authorities, the Railways and other such bodies. Thus, these types of PFs are mainly defined by government bodies.
  2. Recognized provident fund: It is the one that applies to all privately-owned organizations that contain more than 20 employees. Moreover, holding a rightful claim to the PF associated with your organization, you will be given a UAN or Universal Account Number. This enables you to transfer your PF funds from one employer to another whenever you move from one occupation to another.
  3. Public provident fund: It is defined by the voluntary nature of investment on the part of the employee. The PPF is also associated with a minimum deposit of Rs. 50 and a maximum amount of Rs. 1.5 lakhs. The PPF has a lock-in period of 15 years.

Q  What is the tax on EPF contributions?

Q  Why tax the PF?

Q  How will it get taxed?