Taxability of interest on Provident fund: interest income earned on the Employees’ PF Contribution to various provident funds to the annual contribution of 2.5 lakh a year.

Its means Interest accrued on Employees PF Contribution exceeding Rs. 2.5 lakh on or after 01.04.2021 shall not be exempt under income tax provision.

For the example:

* Detail Clarification related to taxable interest, Declaration required, will follow.

Mr. X does not need to pay any tax on interest on Employee PF contribution because his contribution does not exceed Rs 2, 50,000 a year.

Mr. Y have to paid tax on interest on PF Contribution above of Rs 2,50,000 i.e. Rs 2,02,000 (4,52,000-2,50,000).

The interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be added to the taxable income and taxed at the normal rates.

This restriction shall be applicable only for the contribution made on or after 01.04.2021.