New Income Tax Rules for General Provident Fund from April 1, 2022

New Income Tax Rule at The GPF:

The CBDT has notified that corporations want to preserve separate PF accounts. One of the accounts can be for taxable contributions, at the same time as the opposite can be for non-taxable contributions beginning 1st April 2021.

After the start of the new fiscal year 2022-23, numerous income tax norms introduced withinside the union budget 2022 have emerged as relevant now. So, it's far critical for a taxpayer to realize the new modifications in regard to the income tax rule, which has emerged as relevant now.

Taxation on Provident Fund (PF) contributions above ₹2.50 Lakh is certainly considered one among them. After the explanation of the provident fund introduced in budget 2021, in 1962 (FY22) the Central Board of Direct Taxes (CBDT) has inserted rule 9D of Income Tax Rules. Under this rule, every EPFO subscriber may have 2 PF/EPF money owed while the second account may have PF contribution beyond the edge limit.

Speaking on General Provident Fund; SEBI registered tax and funding professional Jitendra Solanki stated, "In price range 2021, the union finance minister had introduced to explanation provident fund through taxing the PF interest earned beyond ₹2.50 lakh contribution in a single economic yr.

To make sure implementation of this declaration and clean calculation of the PF interest earned through an EPFO subscriber,

CBDT inserted rule nine of Income Tax Rules, 1962 in FY2021-22. As in keeping with this rule, each EPFO subscriber may have 2 EPF or PF debts in which PF contribution beyond ₹2.50 lakh in a single economic year will be deposited in a 2nd PF or EPF account. So, interest earned in EPF/PF-1 account will be loose from any taxation even as interest earned in PF/EPF-2 account could be taxable."

What is The GPF?

General Provident Fund is a form of PPF account for all authorities personnel in India. Also, this account lets the authorities' personnel make a contribution of a sure percent of their revenue to the General Provident Fund. Hence, the full quantity gathered at some point of the employment time period is paid at retirement to the employee.

The charge of the interest of GPF is revised periodically in keeping with the authorities' regulations. However, the current rate of interest of GPF is 7.1% (i.e. January 2022 – March 2022).

Once a person subscriber applies for the General Provident Fund, they have to make a contribution cash until there may be a case of suspension. Moreover, in keeping with the authority's rules, one can actually prevent the charge to the GPF account 3 months earlier than the date of retirement.

Who all will Must Pay Tax on GPF?

According to rule 9D of Income-tax Rules, 1962, which become inserted with the aid of using the Central Board of Direct Taxes closing year, all non-authorities employees — wherein the organization is contributing — with a provident fund amounting above Rs 2. 5 lakhs can pay tax on interest income of EPF.

Similarly, all authorities’ employees — wherein the organization isn't always contributing — with a provident fund amount above the brink restriction of Rs five lakh can pay tax on the interest income of GPF.

How will The Tax on GPF be Computed?

Firstly, separate money accounts in the PF account might be maintained for FY 2021-22 onwards, for segregating the taxable and non-taxable contributions.

Here's how the authority's notification explains taxable and non-taxable contributions: -

A Non-Taxable Contribution Account will be The Mixture of –

i) Closing stability withinside the account as of the thirty-first day of March 2021

ii) Any contribution made through the man/woman withinside the account in the course of the preceding 12 months 2021-2022 and next preceding years, which isn't always included withinside the taxable contribution account

iii) Interest accumulated on (i) and (ii)

A Taxable Contribution Account will be a Mixture of :

i) Any contribution made through he/she in the preceding 12 months withinside the account in the course of the preceding 12 months 2021-2022 and next preceding years, that is in extra of the edge limit

ii) Interest Accumulated on (i)

Breaking it down, all contributions made through personnel till March 31, 2021, will be non-taxable contributions and all profits from contributions in extra of the desired threshold limits made in FY2021-22 might be taxable.