Splitting PF Accounts may experience delays.
Experts say the Employees’ Provident Fund Organisation (EPFO) hasn’t been able to separate subscriber accounts into two for members who paid more than 2.5 lakh in the previous fiscal year, which could result in tax problems and filing issues. The EPFO is most likely to divide accounts only when crediting interest for fiscal year 2021-22, which occurs between September and December of the following fiscal year.
At its central board of trustees meeting this month, the EPFO set an interest rate of 8.1 percent for 2021-22. Interest collected on subscriber contributions of more than 2.5 lakh rupees was taxed in last year’s budget. Because income tax returns must be submitted by July 31, taxpayers who are unaware of the taxable interest generated on their provident fund payments may face complications.
Existing provident fund (PF) accounts with an employee contribution of more than 2.5 lakh were to be split into two on April 1st, according to the plan. The Central Board of Direct Taxes (CBDT) added Rule 9D into the Income-Tax Rules, 1962, stating that taxable and non-taxable contributions to PF, as well as interest paid, must be kept distinct accounts inside the PF account.
There is still a lack of clarity on how this will be accomplished. EPFO is nearing completion of the second system, which may be operational as soon as the retirement fund body begins accounting for the previous year. Those with an annual basic income of over 21 lakh or more would be caught in this net because their 12 percent contribution would be more than 2.5 lakh. Employee donations would be included toward this limit as well.
