Union Budget 2022: PHDCCI bats for re-think on Tax on PF contribution interest exceeding Rs 2.5 lakh a year

New Delhi: The PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to re-think on Tax on PF contribution interest exceeding Rs 2.5 lakh a year.

Taxability of Interest on PF contribution exceeding Rs.2.5 lakh a year As per proviso to Sections 10(11)/(12) of the I.T. Act inserted w.e.f. 1.4.2021, interest accrued on employee contribution to PF in excess of Rs.2.5 lakhs in a year shall not be exempt. This proviso has been introduced to desist HNI from contributing substantial amount to PF and getting tax free interest income thereon, said PHDCCI.

“It may please be appreciated that in India, Social Security Scheme are not too many. No social security is being provided to old age person by the Government as is the case in some of the other countries. Thus, a person has to contribute maximum amount so that sufficient corpus is available to safeguard old age period. Putting a limit and that too only Rs.2.5 lakhs a year will discourage the employees to accumulate its savings for old age,” the trade body added.

PHDCCI further said that higher contribution is all the more important keeping in view the falling interest rate on the savings.

The following may be considered:

Delete the proviso added vide Finance Act, 2021 to Section 10(11) and 10(12) and/or

Mandatory PF contribution by an employee as per the PF Laws or Rs.2.5 lakhs, whichever is higher should be the least limit instead of Rs.2.5 lakhs.