PF to income tax to air travel, 10 ways your life will change from today
Premium
5 min read
The interest earned on employee's contribution above ₹2.5 lakh in a year will be taxable from this month. Buying a pension cover will become easier. Take a look at key changes that are going to take place from 1 April
Share Via
Read Full Story
With the beginning of new financial year from Thursday, there will be a host of changes in how you spend money. From changes airfare to standard insurance policies, several new norms will be effective from 1 April. The interest earned on employee's contribution above ₹2.5 lakh in a year will be taxable from this month. Buying a pension cover will become easier.
‘The total threshold for private sector employees is at ₹10 lakh’
The Finance Ministry has strongly defended its decision to grant a higher tax-free threshold of ₹5 lakh for Provident Fund contributions by government employees, compared to private sector workers whose income on annual contributions beyond ₹2.5 lakh will be taxed from this year.
“I would like you to clarify this. There are two ways the contribution can be made — by the employer and by the employee. In case where the contributions are made by both of them, the employers’ contribution up to ₹7.5 lakh is exempt and for employees, it’s ₹2.5 lakh. So the total threshold for private sector employees is at ₹10 lakh,” Revenue Secretary Tarun Bajaj explained.
I am Tania Jaleel
Belying huge expectations, did not provided any income tax relief to tax payers.
No changes in income tax slabs or rates have been proposed.
Nor have any additional tax exemptions or deductions been introduced.
Standard deduction for the salaried and pensioners also remains same as before.
No change in tax rates or slabs means that your income tax payout is, for most people, unaffected by this Budget.
But if your salary's high or you use voluntary provident fund contributions, there's a bit of bad news for you.
From April 1, returns on investment of more than Rs 2.5 lakh in two of the most popular instruments - provident fund and unit linked insurance plan (ULIP) - will be taxed.
The decision to remove the tax exemption on provident fund contributions of ₹2.5 lakh and above in the budget was based on the principle of equity, said revenue secretary Ajay Bhushan Pandey.
“Any tax exemption is taxpayers’ money— assured return being given is again coming out from the taxpayers’ money,” he told ET in an interview. “The question is those who are depositing higher, should they be given the tax concession at the cost of another taxpayer?”
In the budget announced on Monday, the government said interest earned on Employees’ Provident Fund contributions of ₹2.5 lakh and above a year will be taxed at the prevailing income tax rates. This limit does not include the employer’s contribution. The new rules will also apply to the General Provident Fund.