2.5 Lacs Limit on Annual PF Investment

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The recent budget introduced a tax on interest earned from PF contributions exceeding £2.5 lakh annually. This discussion clarifies that the limit applies only to EPF accounts, not PPF. It also confirms that while EPF/VPF contributions can exceed £2.5 lakh, the PPF account itself has a separate annual deposit limit of £1.5 lakh and its corpus remains tax-free at exit.

Sherine

Sherine (Querist)

30 May 2021 Dear Sir/Madam,

In the recent budget it was announce that the interest earned on any contributions by people to PF accounts exceeding 2.5 lacs will be taxable, I am a bit confused on interpreting this, below are my questions:

1) Does this limit of 2.5 Lacs takes into consideration both EPF/VPF account and PPF account?

2) Will there be taxes applicable still if EPF+VPF contributions are about 2.5 Lacs per year and we again invest upto 1.5 Lacs on PPF?

Request your help in clearing this confusion i got,

Thanks
Sherine

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

30 May 2021 1 It's EPF account only.
2 yes, you can do.

Sherine

Sherine (Querist)

31 May 2021 Thanks a lot for the response sir!
Had a couple of more questions regarding PPF, would be great if you can help me understand -

1) Will there be an option to contribute more than 1.5 L per annum or will the account not accept any deposits more than 1.5 L per annum?

2) Will the corpus of PPF still be tax free (at exit) even if I contribute about 3 Lacs in EPF+VPF and 1.5 Lacs in PPF per year?

Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

01 June 2021 1 It will not accept more than 1.50 lacs.
2 yes, it's tax free.

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