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You will now Have 2 PF Accounts


Now if an employee contribution in their EPF and VPF (Voluntary Provident Fund) exceeds 2.5 lakh (in case of non-government employees) and 5 lakh (in case of government employees) then, Central Board of Direct Taxes (CBDT) has notified that an individual needs to maintain two separate accounts beginning this fiscal.

Both the PF account will separately maintain the taxable and non-taxable contribution of the employee, and this will facilitate easy calculation for the taxpayer.

In Budget 2021, Finance minister Nirmala Sitaraman announced that employee’s PF contribution of more than 2.5 lakh in a fiscal will be taxable, and tax payable will be calculated after deducting the withdrawal amount made from the taxable account. On 31st August, CBDT notification has provided the clarity that in what manner the interest will be taxable in the given threshold.

What these Two Separate PF Accounts Will Hold?

Now, what happens that, till Financial Year 2022, all contributions made in PF account so far, including contribution up to 2.5 lakh will be placed in one PF account in which no tax will be levied, and where contribution, interest, withdrawal are all tax-free.

And in second PF account which will be opened for each subscriber in Financial Year 2022, the contribution of more than 2.5 lakh (in case of non-government employee’s) and 5 lakh (in case of government employee’s) made in the current year and in subsequent years will be placed .and the interest earned from this contribution will be taxable.

As per the Central Board of Direct Taxes (CBTD) notification, any contribution made till 31st March 2021 will be non-taxable. And starting from the financial year 2021-2022, interest will be calculated separately in both the EPF account.

This rule will come into effect from 1st April 2022.


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