I work in an IT firm, and my contribution to PF is ₹10,000, which is matched by my employer. If I wish to contribute extra in the direction of PF, will that be capped at ₹10,000 per yr? Will tax exemption be given just for PF investments as much as ₹2.5 lakh? Will voluntary provident fund (VPF) contributions as much as ₹2.5 lakh per yr even be tax exempt?
—Snehal
As per the Finance Act, 2021, the curiosity accrued on contributions in extra of ₹2.5 lakh each year made by an worker to the staff’ provident fund from FY22 onwards shall now be taxable. An worker’s contribution would come with each regular PF and VPF contributions. Further, there isn’t any cap on VPF contribution topic to internet wage. The worker might select to contribute increased VPF topic to EPF wages. However, the curiosity on worker PF contribution in extra of ₹2.5 lakh shall be topic to tax.
In the moment case, as the worker’s annual regular contribution is ₹1.2 lakh, the worker’s VPF contribution as much as ₹1.3 lakh is not going to set off revenue tax on curiosity revenue.
The revenue tax on curiosity revenue shall be triggered solely on an worker’s contribution quantity exceeding ₹2.5 lakh.
Furthermore, for computing ₹2.5 lakh, solely the worker’s contribution (regular + VPF) is required to be evaluated and never the employer’s contribution.
Please observe that the principles governing the way and timing of computation of such taxable curiosity haven’t but been prescribed.
I work as a analysis assistant for a reputed establishment in India. The emolument for a similar is ₹50,000 per 30 days for a interval of six months, extendable as much as 1 yr. However, I’m not sure whether or not analysis emolument requires fee of revenue tax. I’ve not been capable of finding data providing readability on the matter. Kindly make clear.
—Vaishakh Nair
According to the Income Tax Act, 1961, any revenue obtained by an individual is taxable until a particular exemption or provision is prescribed on this regard.
Depending on the contractual association between you and the establishment, in case it’s established that there’s an employer-employee relationship between you and the establishment, the emoluments obtained by you shall be chargeable to tax as wage revenue.
However, in case the contractual association is within the nature {of professional} charges, the emoluments obtained by you shall be taxed as skilled revenue (i.e. below revenue from enterprise or career). In such a case, relying on the gross receipts or revenue of the enterprise or career—applicability of tax charges (regular or presumptive tax charges), applicability of GST and compliance thereunder, applicability of sustaining books of accounts and conducting tax audit would should be evaluated.
Further, in case it may be established that the emoluments obtained by you’re within the nature of scholarship granted to satisfy the price of schooling, the emoluments could also be thought of as exempt from revenue tax.
Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India.
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