New Rule: How To Calculate Taxable Interest In PF Accounts

New Delhi: Interest income accrued in provident fund (PF) above a specified limit will be taxed, Central Board of Direct Taxes (CBDT) has notified.

The Income-tax (25th Amendment) Rules, 2021, framed to calculate taxable interest, state that separate accounts within the provident fund account shall be maintained during 2021-2022 and all subsequent years for taxable and non-taxable contributions made by a person.

Non-taxable contribution account shall be aggregate of the closing balance in the PF account as on March 31, 2021, and any contribution made by the person in the account in 2021-2022 and in subsequent years, which is in excess of the threshold limit.

The new rule will come into force on April 1, 2022, CBDT said.

Earlier this year, the Central government introduced a provision which makes interest accrued in PF account on contribution above Rs 2.5 lakh a year taxable for non-government employees, while the PF threshold is Rs 5 lakh for government employees.