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🟥PF interest पर लगेगा TAX 😡 कैसे बचाए ? EPFO Budget 2021 Updates | PF Latest News - YouTube
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So for him to give both taxes
concession and also assured 8% return,
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I don't think this is correct.,
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The big announcement of Budget 2021;
Will PF interest now be taxed?
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Let's understand it in this episode.
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[Intro Music]
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So in Budget 2021, this rule has been
mentioned in point number 15 of Annexure B.
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It is quite complex to read,
no problem, I am going to explain.
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In this rule, it has been said that
if an employee contributes more than
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Rs 2.5 lakh towards his PF in any financial
year, then he will have to pay tax on the
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interest earned on the excess amount.
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Don't worry, we will understand by example too.
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But before that it is important
to understand why this was done.
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I have two explanations.
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Explanation number – 1
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One who is rich, who has a good salary.
He can also double his contribution.
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So when he doubles his contribution,
he is earning a kind of exempt income.
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This has been caught sight by
The Indian government authorities.
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So what is it, herein
India the laws develop like this.
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Explanation - 2
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it is only for big-ticket
money which comes into it,
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because it has a tax benefit
and also assured about 8% return.
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you find huge amounts sum to
their extent of 1 crore rupees
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also being put into this each month.
What should be his salary?
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So for him to give both taxes
concession and also assured 8% return,
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I don't think this is correct.
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Now tell me which explanation
do you think is better?
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CA Anoop's or our Finance Minister's
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Let's understand with an example
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Suppose the PF wage or basic wage
of an employee is Rs 6 lakh annually.
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On that, he gets his PF
deduction is done at the rate of 12%.
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PF deducted 12% of 6 lacs i.e. Rs 72000.
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Now on these 72000 rupees,
he earns interest every year.
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Last year the rate of interest was 8.5%.
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Let's say for easy calculation.
Well, it is not done like this.
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8.5% of Rs.72000 for easy calculation,
so it earns interest of Rs.6120 approx.
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Now he will have to pay some
tax on this interest or not.
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No, he does not have to pay
any tax on this interest
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because the limit set by
the government is 2.5 lakh rupees.
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He will have to pay tax only on the
interest he earns on more than 2.5 lakh rupees.
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Obviously, 72000 rupees is less than 2.5 lakhs.
So he doesn't have to pay any tax on it.
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Now let's change the example a bit.
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In this example, suppose this employee is
not yet married and there is no much
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responsibility on him and he is thinking that
now I should save more and more money.
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I am watching videos of LLA.
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So now this employee told his employer
to deduct PF at 50% instead of 12%.
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And it is possible to do so; you can
contribute 50% instead of 12% on a voluntary basis.
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So in this case, out of Rs 6 lakh
of that employee, Rs 3 lakh which
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is the contribution of the employee
will be deducted and deposited in PF.
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By the way, the employer is not required to do this match. The employer can only
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pay upto 15000 rupees ceiling
at 12% rate i.e. 1800 rupees.
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Well coming back to the point.
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So this employee deposited
Rs 3 lakh in PF account.
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The situation till now was
that whatever interest he got
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was completely tax-free and a good
8.5% interest is almost what he gets.
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It used to be tax-free for that employee.
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But only the interest he will earn
up to 2.5 lakhs will remain tax-free only.
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Whatever interest he has earned
after this limit will become taxable.
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So again for the simple calculation.
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You see that up to Rs 2.5 lakh that
an employee earns interest of about Rs 21000.
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On the remaining 50000 rupees, the interest
of a few thousand rupees has been earned by that employee.
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From now on that earned
interest will become taxable.
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Let us see another example, suppose the
basic salary of an employee is Rs 2 lakh per month.
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So the annual salary he got is Rs 24 lakhs. 24 lakhs at 12%
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which is the standard deduction, this employee
contributed and did not make any extra contribution.
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The deduction that is made at the rate
of 12% on this salary is Rs 2 lakh 88 thousand.
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Again you should note that
this is more than 2.5 lakh rupees.
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So the interest earned up to Rs 2.5 lakh
is completely free, again about Rs 21000
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is tax-free and the interest earned on
the remaining 38000 rupees in that
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the financial year will be taxed to that employee.
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So the important thing is whether
this change will make any difference
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to the common salaried employee or not.
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So our Finance Minister said in
the press conference that this move
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Out of the overall employees;
only 1% of the employees,
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who earn such a high salary, contribute so
much to PF, it will only affect them.
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Anyone who has more than 20.83 Lakh
PF wage a year will definitely attract
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his or her interest on EPF
contribution being taxed.
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On a salary less than that,
if you contribute to PF at
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a higher percentage, then only this
rule is likely to make a difference to you.
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So how can you confirm this thing?
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So first you go to your member portal.
There the passbook will be available in a new format.
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You just have to download the
passbook of that format.
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In that passbook, you have to
refer employee share column.
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In this, you will see 12
values of any financial year.
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Add these 12 values and if it
is more than 2.5 lakh rupees then
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the interest you have earned below.
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Some part of this interest will become taxable.
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By the way, the calculation of PF
interest is not done this way by
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adding all that and multiplying it by
the interest rate of that year.
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Rather, the interest of every month
is added according to a calculation method.
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So I am still really confused,
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how the government will do
the exact calculation that
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when Rs 2.5 lakh is crossed,
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will it apply interest on the above
values or not. Somehow it’s complex.
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If you want to understand the
complete calculation of PF interest,
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then I am giving a video on "I" button.
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But you watch that video only
when you watch this full video.
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Well apart from this, we do not
even know how you will pay tax
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on the access interest you earn.
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Will it be added to the income
from other sources and tax will be given.
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Or the government will say that
when EPFO pays you, it will give it
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to you only after deducting the tax.
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Future will tell and Labour Law
Advisor will obviously let you know.
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Before leaving you all, there’s good news
for employees and somewhat bad news for employers.
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The Finance Minister has said in his
speech that from now on any employer
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if after 15th; which is the deadline
for the contribution of PF.
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If he pays the PF contribution after that,
then he will not get any business deduction on it.
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That is, suppose there is a challan(invoice)
of PF of 1 to 2 lakh or 5 lakh rupees.
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So the employer will not be able to claim
that full amount in the business expenses.
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And the business will have to pay
tax on it again 30% - 40% whatever
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the limit is according to the business.
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The employers have been hit double
because if they delay after the 15th date,
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then the interest and penalty
in any way is quite heavy.
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Apart from that, the entire amount
will be debar for deduction.
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So overall this is good news
for the employees as this will keep
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the employers more vigilant and keep
depositing their PF contribution on time.
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Before leaving, I'm leaving you with 2 videos.
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First of all, watch this video,
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if you want to understand pf
interest calculation in detail.
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Second video, if you want to learn
the compliances of pf; As a HR or
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as a future labor law consultant then
you can check out this course or video of ours.
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Jai Hind! Jai Bharat!
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