Updated Feb 11, 2021 | 06:15 IST
FM Sitharaman in her Budget 2021 speech proposed to tax interest earned on annual provident fund contribution beyond Rs 2.5 lakh. This proposal is going to severely impact EPF returns of high-income earners
EPF interest taxation may impact your retirement plans. Here's how
New Delhi: When it comes to retirement savings or investment, the Employees Provident Fund (EPF) is one of the most common choices for a lot of people in India. For many, EPF is the only retirement saving option as it is safe and offers great returns.
For those who are not aware, EPF is a retirement savings investment tool wherein employers must contribute 12% of the basic salary plus dearness allowance and deduct an additional 12% on behalf of the employee. Out of the employer’s contribution, 8.33% goes to the Employees’ Pension Scheme (EPS) and earns no interest. However, the remaining 3.67% and the whole of employee’s contribution portion earns an interest every year. The interest on EPF deposits has been in the 8-9% range over the past decade.