What Are The Income Tax Benefits On EPF Contribution

 Introduction

PF Registration means Provident Fund which is governed by EPFO. The government introduced these kinds of funds to provide various economical supports to employees working for organizations. Employers and employees contribute some amount from their salary to the PF fund which can be used for employees as their savings. These savings earned by the employees can be used later for their personal use.

As the world is slowly entering into a digitized universe, EPF registration online can be assumed as a vital aspect of the process. With that certain aspects are also important such as “income tax benefits on EPF contribution”

What is EPF?

EPF is Employees Provident Fund (EPF), a scheme under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

Such schemes are targeted to benefit the employees when they retire from the job—their other methods as well, which are destined to maximize the benefits for such employees.

INCOME TAX BENEFITS ON EPF CONTRIBUTION

As employers, it is always crucial to know the EPF contribution and the income tax benefits on such contribution. To very basic knowledge, the government or say the employer deducts your 12% or such rate decided by government time to time from the salary, and this is applicable for all such people whose salary is up to 15,000.

If in any case, the salary increases by 15,000, then the employer can restrict the deduction too, depending upon the circumstances and the amendments that often take place.

For the purposes of EPF contribution, you are entitled to a deduction of salary under Section 80 C, up to the amount of 1.50 lakh every year, for basic purposes of tuition fee, repayment of the loan, etc.

There is no tax liability for the employee in respect of contribution made by the employer up to 12% or such rate decided by government time to time of the basic salary beyond which it becomes taxable in the hands of the employee. 

Taxability

If we now talk about the taxability on the withdrawals of such EPF, it will be legitimate to mention that the whole amount is free of tax, unless you have not made any contribution in the last 5 years.

In case the EPF balance becomes taxable in your hands due to premature withdrawal, the tax will be deducted @ 10% or such rate decided by the government from time to time on the entire balance in case the accumulated balance is payable to the employee is fifty thousand rupees or more.

 However, in case you do have a Permanent Account Number (PAN) or do not furnish the same to the person responsible for paying the amount, the payer will deduct tax @ 30% or such rate decided by the government from time to time. 

As far as the head under which the withdrawal is taxed, it is considered that in any case, the amount is withdrawn before the time of 5 years; the specified portion of contribution with the interest will thereby become taxable under the head of “salaries”.

Then your contribution along with the taxes will be therefore taxed under the head of “income from other sources”.

Therefore, it is recommendable that a complete check on such activities must be regulated and scrutinization of policies should be there.

Conclusion

There is no single doubt that PF registration is not an important topic. However, in cases like tax contribution for EPF purposes, it becomes vital to introduce yourself to such registration processes as EPF registration online.

To successfully execute such tasks, it is thereby recommended to refer to ``LegalPillers”, which is a team building for excellence, their services are equipped with online CA services and even online chartered accountants which are always available to fulfill the tasks.