There’s nonetheless one thing to cheer for the workers contributing throughout the threshold restrict of Rs 2.5 lakh in a monetary yr, the place the employer can also be making contributions.
The choice of the Central Board of Trustees of the Workers’ Provident Fund Organisation (EPFO) taken on March 12, 2022 to decrease the curiosity on PF deposits for 2021-22 to an over four-decade-low of 8.1 per cent from the earlier fee of 8.5 per cent, might have hit the morale of the non-public sector staff having Workers Provident Fund (EPF) as their retirement profit scheme, particularly after the federal government’s determination to make PF contributions over a sure threshold restrict taxable.
However there may be nonetheless one thing to cheer for the workers contributing throughout the threshold restrict of Rs 2.5 lakh in a monetary yr, the place the employer can also be making contributions. The brink restrict is Rs 5 lakh in a monetary yr, the place solely staff contribute – just like the Normal Provident Fund (GPF).
It’s because the present fee of 8.1 per cent is the minimal fee of curiosity to be declared for PF members and the businesses having PF trusts will pay a better curiosity to the beneficiary staff.
“Firms having PF trusts (exempt institutions) are required to supply advantages that are at par or larger than the RPFC (Regional Provident Fund Commissioner). Therefore PF trusts can not declare a fee of curiosity which is decrease than what RPFC offers. Nonetheless the place the belief has a great return on its investments, the speed of curiosity declared by the belief is larger. In truth, one of many conventional explanation why firms arrange PF trusts was to reinforce worker expertise and supply larger returns,” mentioned Saraswathi Kasturirangan, Associate, Deloitte India.
Furthermore, staff don’t even must pay tax on curiosity larger than the declared fee of 8.1 per cent except the speed crosses 9.5 per cent.
“The upper returns offered by the PF trusts are additionally tax exempt offered the speed of curiosity doesn’t exceed 9.5 per cent,” mentioned Kasturirangan.
Nonetheless, for the workers contributing over the brink restrict, the disadvantage is that the quantity exceeding the restrict will likely be put in a separate taxable PF account and the cumulative curiosity earned on it yr after yr will likely be added to their taxable earnings.