The Budget 2021 has proposed to restrict tax benefit for the interest income earned on the employees’ contribution to various provident funds for employees whose annual contribution will be more than Rs. 2.50 lakh. This will be applied to all the contributions made from 01st April 2021.
“In order to rationalize tax exemption for the income earned by high-income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ₹2.5 lakh,” the Budget data writes.
EPF contribution currently is set at 12% of the salary. However, you can voluntarily contribute up to 100% of your basic salary to VPF. And the withdrawal of EPF after 5 years of continuous service is exempt from tax.
The application of taxes is yet to be announced. This is likely to jeopardize the most preferred investment avenue for many taxpayers.
The question is if want to save more tax, contact Aegis Financial for proper tax planning.
5 Comments
Sir, my totsl vonttibution Company:Rs.121452 VPF :Rs.131568 Total : Rs.253020. 1.Kindly tell me taxable amount on above and rate of tax 2.can i reduce VPF Contribution to stay within Max.limit. 3.Every year Company conttibution will increase then total will again cross msx.limit 2.t lakh
ReplyDear Sir, only employee contribution to EPF and VPF is going to get considered for the new limit of Rs. 2.5 lakh. So, if your total contribution exceeds Rs. 2.50 lakh per annum, then it is highly advisable to reduce your VPF contribution. Every year you should try to make both the contributions less than Rs. 2.50 lakh, until there is any relaxation in future. Moreover, there are other ways to invest the excess VPF amount in order to get the same and safe return.
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