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Workers’ Provident Fund Tax Advantages: It’s that point of the 12 months when it’s a must to select between the previous and the brand new revenue tax regime in order that your employer will begin reducing TDS from the April wage. When understanding the tax exemptions out there underneath the previous tax regime and deciding on tax saving investments, don’t neglect to contemplate your EPF contribution.Ranging from April 1, 2023, the brand new tax regime grew to become the default choice. Consequently, if an worker fails to tell their employer about their tax regime desire originally of the monetary 12 months, their wage’s Tax Deducted at Supply (TDS) will likely be calculated based mostly on the brand new tax regime.Nevertheless, amidst this hustle, there’s one often-overlooked avenue that inadvertently aids in tax-saving – the Workers’ Provident Fund (EPF). If you’re seeking to go for the previous revenue tax regime, then concentrate on the EPF advantages, returns, liquidity and different particulars.Additionally Learn | New Vs Previous Tax Regime: How revenue of even Rs 10 lakh might be tax-free underneath previous tax regimeAn particular person’s contribution to the EPF is deducted from their wage earlier than it reaches their checking account. This contribution qualifies for a deduction underneath Part 80C of the Revenue Tax Act, 1961.Maximising EPF contributions for tax benefitsAccording to an ET report, underneath the EPF scheme, workers contribute 12% of their primary wage to the EPF account, matched by the employer. Nevertheless, tax advantages underneath Part 80C apply solely to the worker’s contribution, not the employer’s.It is necessary to spotlight that there isn’t any cap on the quantity workers can deposit into their EPF account, solely a share restrict. Nevertheless, Part 80C permits deductions of as much as Rs 1.5 lakh yearly from the gross complete revenue.For instance, if somebody earns a yearly primary wage of Rs 7 lakh, their EPF contribution for the complete monetary 12 months could be Rs 84,000 (12% of Rs 7 lakh). On this case, the whole quantity is eligible for deduction underneath Part 80C. To optimise the advantages underneath Part 80C, they could think about making extra investments in particular avenues like ELSS mutual funds or paying life insurance coverage premiums.Now, if somebody earns an annual primary wage of, as an example, Rs 15 lakh, their EPF contribution for the complete fiscal 12 months could be Rs 1.8 lakh (12% of Rs 15 lakh). Nevertheless, solely as much as Rs 1.5 lakh is eligible for deduction underneath Part 80C. The remaining Rs 30,000 won’t qualify for the deduction. Therefore, when planning for tax saving investments underneath the previous regime, it’s necessary to notice that the Part 80C restrict would have been consumed by EPF solely.Voluntary Provident Fund (VPF) for enhanced savingsIt’s necessary to say that people can contribute greater than the necessary 12% to their EPF account by the Voluntary Provident Fund (VPF). They will contribute as much as 100% of their primary wage to the EPF. If a person’s personal contribution to EPF is lower than Rs 1.5 lakh in a monetary 12 months, they will make extra contributions by way of VPF. These VPF contributions are additionally eligible for deductions underneath Part 80C.Additionally Learn | TDS on wage: Don’t pay greater tax! How to decide on between new and previous revenue tax regimeEPF Returns, liquidity, and taxationInterest is paid to EPF account holders on their contributions. The federal government publicizes the rate of interest each monetary 12 months, and for FY2023-24, it has been set at 8.25%. This price is notified by the Finance Ministry earlier than the Workers’ Provident Fund Organisation (EPFO) begins crediting the cash to the EPF account.Much like different tax-saving investments, EPF additionally has a lock-in interval. The EPF account matures on the time of the worker’s retirement, usually on the age of 58. Nevertheless, if an worker leaves their job and stays unemployed for 2 months thereafter, they will shut the EPF account and withdraw the amassed funds together with the curiosity.Moreover, the EPF scheme permits partial withdrawals for particular functions, topic to sure eligibility standards. For instance, withdrawals are allowed for buying a home after 5 years of membership, and for self, youngsters, and siblings’ marriages after 7 years of membership.Investments within the EPF account are tax-exempt underneath particular situations. Based on revenue tax legal guidelines, a person’s EPF contributions are tax-exempt, supplied withdrawals are made after 5 years of steady service. Nevertheless, withdrawals made earlier than finishing 5 years of service are taxable.Curiosity earned on an worker’s EPF contribution is tax-exempt as much as a sure restrict. If the curiosity earned from the worker’s EPF contribution exceeds Rs 2.5 lakh in a monetary 12 months, it turns into taxable. Nevertheless, if the person’s EPF contribution stays under Rs 2.5 lakh in a monetary 12 months, the curiosity earned stays tax-exempt. This restrict has been raised to Rs 5 lakh for presidency workers.Moreover, moreover the worker’s contribution, there’s additionally an employer’s contribution to the EPF account. If the whole contribution from the employer to EPF, superannuation fund, and Nationwide Pension System (NPS) exceeds Rs 7.5 lakh in a monetary 12 months, the employer’s contribution turns into taxable. Moreover, any curiosity, returns, or dividends earned on the surplus contribution may also be taxable.

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