Taxability of "Interest on Employer contribution to PF"

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Shweta

Shweta (Querist)
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12 April 2023 1) Whether the interest earned on Employer contribution to PF is taxable or not?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 April 2023 Effective 1 April 2022, any interest on an employee's contribution to EPF upto INR 2.5 lakhs per year is tax-free and any interest earned on a contribution over and above INR 2.5 lakhs is taxable in the hands of the employees.
The threshold of INR 2.5 lakhs is increased to INR 5 lakhs in case the employer is not contributing towards EPF.

Shweta

Shweta (Querist)
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13 April 2023 Thanks so much Sir.

What about the taxability of interest earned on EMPLOYER Contribution?

As per my understanding, the new rules on taxability of interest on PF apply to the contributions made by the employee, while contributions made by the employer will not be taxed.

Request to please confirm

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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13 April 2023 Employer contribution to Provident Fund (PF), NPS and superannuation aggregating to Rs 7.5 lakh is tax exempt. Contributions beyond this limit, along with accretions (i.e., interest, dividend, etc.) on such excess contribution is now taxable as salary income effective from FY 2020-21.

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Shweta

Shweta (Querist)
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13 April 2023 Thanks so much for your reply Sir

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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13 April 2023 You are welcome.

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