As per a CBDT notification, if an individual's contribution in EPF account is over Rs. 2.5 lakh in a fiscal year then he or she would need to maintain 2 separate provident fund accounts from Fy22. The guideline has come up following the new provision in Union Budget 2021 as per which interest on PF contribution more than Rs. 2.5 lakh will be taxable.
Now the 2 accounts will enable easy calculations for taxpayers as the one account will maintain taxable contribution as well as non-taxable component. The notification has also cleared the air around the way in which the interest on the contribution about the threshold will attract tax implications.
Further in accordance with the notification, the new ruling will come into effect from FY22 and hence contributions made till March 31, 2021 are non-taxable. In a case when your EPF account does not draws employer contribution, the limit shall be Rs. 5 lakh.
"An account holder or an employer is not in a position to open this account on his own. By the law, the onus is on the PF authorities to maintain it", said Sudhir Kaushik, co-founder and CEO, Taxspanner,
This is to be understood that the second EPF account with taxable contribution will open automatically. The other non-taxable account will be including the closing balance of your PF account as on March 31,2021, contributions that are part of the threshold limit in 2021-22 as well as in subsequent years and the accrued interest, as per the release.