In respect of the social security scheme contribution, considering the Budget announcements made this year, there are several facets that need to be known by an EPF or employee provident fund subscriber:
1. The Budget 2021 said that if the person's contribution to the EPF and PPF in a fiscal year exceeded Rs. 2.5 lakh, then the interest on the contributed sum shall be taxable in respect of the excess amount.
2. In a case if the employee is not making any contribution to the EPF account then there shall be no tax in respect on interest earned fromsuch provident fund accounts even if the contribution is up to Rs. 5 lakh in a fiscal year.
3. There is another factor or aspect to the EPF that may not be known to many i.e. there has been rolled out direct benefit pension scheme in public sector banks as well as insurance companies. Likewise for those employees who form the part of the Direct benefit pension scheme, employers are not required to make contribution to their employee's EPF account. Nonetheless, for such members can equal contribution has to be made towards the employee's pension fund.
Taxability of EPF Interest In case when the employer makes no contribution
So for those of you who are beneficiaries of DBPS and for whom employers' are not making contribution to the employees account then for them the new ruling as per the Finance Act 2021 ,which states that interest accrued on contribution of more than Rs. 2.5 lakh in a year to the EPF shall be taxable from FY22, will not be applicable.
But herein interest accrued on contributions of over Rs. 5 lakh per year shall be taxable. Here in what is important that still the rules in respect of timing and manner for computation of such taxable interest have not been made known.