Budget 2021: People with hefty salaries are baffled, if there is more than 2.5 lakh PF contribution annually, then interest will be taxed

Harleen Kaur Grewal
Pune, February 1, 2021: People who have paid more and get more money in the provident fund (PF) have received a setback from the budget. In the Budget 2021-22, the PF proposes to tax the interest on the amount above a certain limit annually.

The budget states that in order to rationalize the tax exemption for income earned by high-income employees, it is proposed to restrict the tax exemption on interest earned on annual contributions of more than Rs 2.5 lakh to various provident funds. This restriction will apply for contributions on or after April 1, 2021.

According to this proposal, now the interest earned on the amount of more than 2.5 lakhs in the annual PF contribution of the employee will be taxed. Tax and investment expert Balwant Jain said that this will harm those who get a higher salary. He told that if an employee’s year-long PF contribution is Rs 3 lakh, then the interest received on the additional PF amount of Rs 50 thousand will be taxed.

This is not the first time that the government has proposed to tax PF money. Such a proposal was also brought in the budget of 2016. In that budget, it was proposed to bring the interest earned on 60 percent of EPF tax. However, there was widespread opposition against this proposal, then it was withdrawn.