Tuesday, 7 December 2010

No Tax on Increased Interest on Employees Provident Fund

As you aware that the interest rate of Employees Provident Fund has been increased for the financial year 2010-2011. There was a doubt that the increased portions attract income tax or not. Now it is clear that there is no tax liability for members for this increased portion of interest. On 6th December, 2010, Lok Sabha informed regarding this matter.

On 15th September, 2010 the provident fund trustees decided to raise the EPF interest rate by one per cent from 8.5 to 9.5 for 2010-11. “The matter has been discussed with Finance Ministry and they have informed that they will revise the notification to 9.5% once it is approved by the Government, `` Minister of State for Labuor and Employment Harish Rawat said in a written reply.

The decision to increase the interest rate of EPF would be benefited to 4.71 crore employees in both public and private sectors and the decision for the tax exemption also be benefited to the same number of employees.

A small exemption in income tax also gives good relief to all. Now one percent interest may not be a small amount for employees those who are an EPF members for a long time.

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  1. [...] minimum amount must be deducted from employee’s salary by the employer and should be deposited in Provident Fund office or any related trust. (One can allow deducting more as voluntary contribution of provident [...]

  2. [...] is also just like 401K and a percentage of the salary deducted and deposited in the Fund or any registered trust for the retirement or any important financial goals of the employee. The [...]