New Delhi: Union Finance Minister Nirmala Sitharaman on Saturday, while presenting the general budget for the year 2020-21, made several announcements related to employed people. Changes have been made in the income tax slab, now the limit of investment in instruments like EPF, NPS has been fixed in terms of tax exemption, due to which they are also likely to be taxed.
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Nirmala Sitharaman has said in her budget speech that the combined upper limit of investment in Employees Provident Fund (EPF), National Pension System (NPS) and Superannuation i.e. Retirement Fund has been raised to Rs 7.5 lakh for tax exemption. All three get the benefit of tax exemption. The budget document states, 'It is proposed that the upper limit of investment in provident funds, superannuation funds and NPS in the account of the employee in a year is fixed at Rs 7.5 lakh.'
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This new rule will come into effect from April 1, 2021, and will be valid for the assessment year 2021-22. This means that if the investment of an employee in one year is more than Rs 7.5 lakh in all these schemes, then it will be taxed. Prior to this, the investment made by the employer in PF and NPS was completely tax-free and there was no limit to it. The only limitation was that the employer would contribute a PF equal to 12% of the employee's CTC salary.
