Govt unlikely to rollback proposal of Rs 2.5 lakh threshold to tax PF interest
NEW DELHI: The government is unlikely to review the Rs 2.5 lakh threshold for taxing interest income on provident fund contributions, arguing that the move affects just 1% of subscribers to the social security scheme according to a report published in TOI.
Government sources said there was a practice of some people parking large sums, even up to Rs1 crore a month, in PF to seek tax exemption and also earn high interest rate.
“Of course, PF is lifetime saving of the working class and the government is committed to ensure that they benefit. But we had to undertake reforms to ensure there is no misuse of the tax exemption on PF deposits,” said a senior government functionary.
Sources said the new measure was introduced to essentially identify those seeking tax exemption and assured returns by parking large amounts in PF accounts. “We have details of certain individuals depositing Rs 1 crore and even Rs 2 crore a month in EPF accounts,” the official said, adding it was causing a loss to the government.