01 April, 2021
6 Min Read
EPF tax rules- Social Security
GS-Paper-3: Economic issue and Economics Optional – UPSC PRELIMS – Mains Application
Context: The new EPF tax rules will come into effect from April 1, 2021 as announced in the Union Budget of 2021. Highly important for UPSC-PRELIMS and EPFO examination.
For EPFO PREPARATION: https://www.aspireias.com/upsc-epfo
Free SOCIAL SECURITY Booklet: https://www.aspireias.com/uploads/upladfile/Social_security_(2).pdf
If a person contributes more than the limit prescribed under Section 80C of the Income Tax Act, he cannot get a tax break on his excess contribution. The earnings on contributions rarely suffered taxation since tax laws pegged tax-free earnings to higher rates than the interest rate on the EPF.
Moreover the person will pay tax on their corpus, only if he withdrew it within 5 years from the comment of the contribution. This taxation framework incentivised employees to use the EPF as their primary retirement saving and it acted as risk-free retirement savings mode.
What is the new rule?
What is the issue with new rules?
Why it is difficult to administer?
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