EPFO New Guidelines: How Taxation Will Change For Govt & Non-Govt Employees on PF Contributions Above ₹ 2.50 Lakh

The Employees Provident Fund Organisation (EPFO) has issued new guidelines on tax deductions for employees in the private sector who contribute more than 2.50 lakh to retirement savings accounts each year.

The EPFO stated in a circular that the taxation threshold for EPF contributions for government employees will be Rs 5 lakh per year. This taxation scheme went into effect on April 1 of this year. Employees in India are required to have an EPF account.

According to the circular, TDS would be deducted when interest is paid to an EPF account. TDS will be deducted at a later date at the final settlement for those pending final settlement or transfers.

For those who have not integrated their PAN into their EPF accounts, a 20% tax would be charged from their annual income on contributions exceeding Rs 2.5 lakh. Those who have connected their EPF accounts to their PAN will be taxed at a rate of 10%.

Other Information about New Guidelines

According to the circular, EPFO would maintain a non-taxable account as well as a taxable account for all such members who contribute more than 2.5 lakh.

If the computed TDS is less than 5,000, no TDS will be deducted from the interest credited to such EPF accounts.

• For ex-pats and non-resident employees with active EPF accounts in India, the tax will be charged at a rate of 30% or according to the requirements of the Double Taxation Avoidance Agreement between India and the respective country.

• TDS would also apply to all EPFO members, particularly members of exempted establishments or exempted trusts.

• In the event of the death of an EPFO member, the TDS rate would remain unchanged.

The interest earned on the funds in EPF accounts is credited on a yearly basis. However, the accounts are kept on a monthly basis. As a result, if no transfers or final settlements are performed throughout the fiscal year, TDS will be deducted when interest is paid.

The EPFO now holds 24.77 crore accounts of its members, making it one of the world's largest clientele.