In Finance Bill 2021, Interest earned on PF contribution up to Rs 5 lakh to be tax-free if there is no employer contribution. During Budget 2021, Sitharaman announced interest earned on the EPF contributions (only employee contribution) above ₹2.5 lakh will be taxable from 1 April.

“In order to rationalise tax exemption for the income earned by high-income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ₹2.5 lakh,” Sitharaman said in her Budget 2021 speech.

 

Finance Bill 2021, aimed at taxing high-value depositors in the Employees Provident Fund. At least 12% of an employee’s basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%.

If employees’ contribution to PF on or after 1 April 2021 exceeds Rs 5 lakh in any year, interest earned on contribution over Rs 5 lakh shall be taxable (applicable in cases where the employer is not contributing).

The Finance Bill, which gives effect to tax proposals for 2021-22, was approved by voice vote. The bill was passed after the acceptance of 127 amendments to the proposed legislation. The minister also stressed that tax on interest on provident fund contribution affects only 1% of the contributors, and the remaining are not impacted as their contribution is less than Rs 2.5 lakh per annum.

 

Responding to comments made by the members on the issues related to GST, Ms. Sitharaman said that the Centre alone has no role in deciding the changes in the GST structure.

She added that the GST council collectively decides on the tax structure after detailed deliberations on the proposals.

Finance Minister Nirmala Sitharaman on Tuesday said she would be “glad” to discuss the suggestion of bringing petrol and diesel under the ambit of the Goods and Services Tax at the next meeting of the GST Council. State levies and central excise duty account for more than half of the retail selling prices of petrol and diesel.

On the issue of bringing petrol and diesel under the GST ambit, the Minister said, the States can bring this issue before the GST council for discussion.

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Referring to existing taxes levied on petrol and diesel, She said, Centre is sharing 41 per cent with the States from devolvable taxes.

On the decision of levying Agriculture Infrastructure and Development Cess, AIDC, she clarified that the collected revenue will go to the States for creating a robust agriculture infrastructure in the country.

She rejected the opposition’s claim that budgetary allocations have been reduced for Minority Affairs and Agriculture.

 

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