Splitting of provident fund accounts could also be delayed

The Workers’ Provident Fund Organisation (EPFO) hasn’t but been in a position to break up subscriber accounts into two for members who contributed greater than ₹2.5 lakh final fiscal, which can create tax issues and submitting points, consultants mentioned. The EPFO is more likely to break up accounts solely on the time of crediting the curiosity for FY22, which typically occurs between September and December of the next fiscal yr, they added. The EPFO had declared an rate of interest of 8.1% for FY22 at its central board of trustees assembly final month.

The funds for FY22 had imposed income-tax on curiosity earned on subscriber contributions of greater than ₹2.5 lakh a yr.

Since income-tax returns are required to be filed by July 31, this will create points if taxpayers are usually not conscious of the taxable curiosity earned on provident fund contributions.

As per the plan, present provident fund (PF) accounts with an worker contribution of over ₹2.5 lakh have been to be break up into two from April 1, 2022. The Central Board of Direct Taxes (CBDT) had inserted Rule 9D within the Earnings-Tax Guidelines, 1962, which specified that two separate accounts inside the PF account shall be maintained to segregate the taxable and non-taxable contributions to PF together with the curiosity paid.

There may be nonetheless a scarcity of readability on the small print of how that is to be carried out.

The EPFO didn’t reply to a question from ET on the doable delay.

“Organisations with PF trusts, which have the duty of withholding tax, have began discussing it however await readability from the EPFO on the right way to go about it as segregated accounts are usually not but in place,” mentioned Saraswathi Kasturirangan, accomplice, Deloitte India. This may increasingly occur on the time of crediting of curiosity for the earlier fiscal, he mentioned.

A prime authorities official advised ET that the EPFO is in superior phases of creating the system and it could possibly be efficient anytime because the retirement fund physique begins accounting for the earlier yr. These with a fundamental wage of about ₹21 lakh or extra would fall underneath this internet as their 12% contribution would exceed ₹2.5 lakh. Voluntary contributions by workers would even be counted towards this restrict.