Tax On Provident Fund Interest : Another Blow on The Salaried Middle Class By The Shopkeeper’s Government

Rajiv Upadhyay

Salaried middle class , which on average pays three times the tax than rich non salaried class of shopkeepers , doctors , lawyers , CAs etc ( Rs 75000 vs 26000), which was looking for safe but above inflation rate interest , has been crushed in last two years in the name 0f reducing cost of capital . The saving bank interest rates are now just three percent or less and FD interest rates are just 5 % . Property is giving no return . Gold is not a good investment .

Salaried class used to bank on PF , VPF and PPF for long term savings as their tax free interest rate of 8 % used to protect the purchasing power of their saving but hardly gave more return . The 2.5 lakh tax free interest ceiling caps tax free balance to about Rs.30 lakhs . The normal group A service people target was to collect Rs 50 lakh in PF before retirement . This group is paying thirty percent tax on DA already as government stubbornly refuses to raise tax free slabs which were last revised by Sri Chidambaram and late Arun Jailtely had promised to revise them as soon as government has more money . Government income has increased many fold but government is only squeezing the salaried class while leaving non/ less tax payers go scot free . We do not hear of raising minimum tax to Rs 2.5 Lakh on lawyers of High and Supreme courts or CAs or shop keepers in big show rooms or big cars . Government bans Walmart to protect small shopkeepers but has never shown any consideration to salaried class . In fact in Smt Gandhi days when inflation had touched 13% government paid DA but in PF . This is the first time DA has not been paid at all . It could have been paid in PF which would not have affected inflation at all .The Ambani or industrialist owned think tanks keep churning out schemes to favour corporate sector . They have a natural aversion to higher government services .Mutual funds , the current darling of government are speculative and not safe from middle class perspective . Demonetisation reduced property to a dummy for investment . NSCs or bonds do not cover inflation as interest is taxable .

This vote and note bank driven economics, devoid of morality, will some day become a cause of pitfall of the government .

It is only fair that the ceiling for tax free interest should be increased to five lakhs or scrapped all together .

Centre Notifies Rules to Divide Provident Fund Into Two Accounts — Taxable & Non-Taxable

© Provided by News18 Centre Notifies Rules to Divide Provident Fund Into Two Accounts — Taxable & Non-TaxableThe finance ministry has notified rules for calculation of taxable interest on employee contributions to provident fund of over Rs 2.5 lakh per annum. In her Budget for 2021-22, Sitharaman had capped the tax-free interest earned on provident fund contribution by employees and employers together to a maximum of Rs 2.5 lakh in a year in an attempt to dissuade high earners from parking their surplus in what is supposed to be the common man’s retirement fund.

The Central Board of Direct Taxes (CBDT) on Wednesday notified rules for calculating taxable interest in provident fund. It said for the sake of calculation, separate accounts within the provident fund account shall be maintained beginning 2021-22 for taxable and non-taxable contributions made by a person.

Nangia & Co LLP Partner Shailesh Kumar said the notification issued by CBDT has finally put to end the ambiguity which arose with the introduction of taxation of interest on provident funds with contribution above the specified threshold. Rule 9D inserted in the Income-tax Rules, 1962 has specified that separate accounts within the PF accounts shall be maintained clearing segregating the taxable and non-taxable contributions to PF along with interest thereon.

“This shall provide a convenience of calculation to the taxpayers for segregation of interest to be offered to tax. The threshold for PF accounts with employer contribution is Rs 2.5 lakhs whereas accounts with no employer contribution enjoy an increased threshold of Rs 5 lakhs,” Kumar added. Employees’ Provident Fund Organisation (EPFO) has over six crore subscribers. The Rs 2.5 lakh limit covers around 93 per cent of the people who are EPFO subscribers and they will continue to get assured tax-free interest. Hence, small and medium taxpayers will not be impacted by the step.

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Tax On Provident Fund Interest : Another Blow on The Salaried Middle Class By The Shopkeeper’s Government

Centre Notifies Rules to Divide Provident Fund Into Two Accounts — Taxable & Non-Taxable

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