Budget 2021: Interest earned on PF contributions above Rs 2.5 lakh now taxable
The interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be taxable. The provision, introduced in Budget 2021 will apply only to the employee's contribution and not that of the employer. The restriction will be applicable for the contribution made on or after April 1, 2021.
"In order to rationalize 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. This restriction shall be applicable only for the contribution made on or after 1.04.2021," the official budget document read.
Meanwhile, the government also extended the additional tax deduction of Rs 1.5 lakh on interest paid on housing loan for purchase of affordable homes by one more year to March 31, 2022, a move aimed at boosting demand in the sluggish real estate sector.
The additional deduction of Rs 1.5 lakh over and above Rs 2 lakh was introduced in the 2019 budget. This was allowed for those buying homes for the first time and of up to Rs 45 lakh.
READ MORE: Union Budget: Govt allocates Rs 4.78 lakh crore for defence
READ MORE: Budget 2021: Additional deduction of Rs 1.5 lakh on home loan interest extended till March 2022
