I prepare to select the brand-new tax obligation regimen when submitting my ITR for AY 2025-26. Currently, I get on the old tax obligation regimen, so the 12% of my income to the Employee Provident Fund (EPF) will certainly proceed via the remainder of the fiscal year. Is it remedy that I can not declare a tax obligation exception on my EPF payments? If I select the brand-new tax obligation regimen at the start of FY 2025-26, can I request my company to quit subtracting the 12% EPF payment from my income, or is this payment compulsory despite the tax obligation regimen? Does selecting the brand-new tax obligation regimen suggest that EPF’s exempt-exempt-exempt (EEE) tax obligation standing no more uses? In various other words, is the tax-free nature of EPF payments, development, and withdrawals impacted under the brand-new regimen?
In the situation of the brand-new regimen, you would certainly not have the ability to declare the reduction on your payment to EPF. However, the payment by your company for 12% of the income remains to be excluded in your hands also under the brand-new tax obligation regimen, based on the general restriction of company’s payment to PF and NPS of 7.5 lakh every year. If your income went beyond 15,000 on signing up with, while you can have selected not to sign up as a participant for PF, when you have actually gone with PF, you can not pull out throughout the duration of work. Therefore, although your payment to PF which is subtracted from your income is no more insurance deductible under area 80C of the Income Tax Act, you would certainly require to proceed adding to PF throughout the duration of your work.
However, you can select to decrease your volunteer payment to PF, that is, the payment of PF over 12% of 15,000. If your month-to-month income is 60,000, your month-to-month payment of 7,200 can be lowered to 1,800 (12% of 15,000). This is an alternative just if you have actually added willingly for at the very least 5 years, as one can not cease volunteer PF within a duration of 5 years from beginning such payment. The company is likewise not obliged to add to PF over of 1,800 each month.
While lowering your PF payment, you require to bear in mind that the worker payment can not be less than the company payment. You need to evaluate whether such an alternative is valuable to you, as a decrease in PF payment by the company (which would certainly have or else been excluded) would certainly lead to rise in your taxed income, given that the company would certainly after that pay you a taxed allocation to make up.
EPF remains to be partly EEE; there is an exception on company payments, an exception for passion made, and an exception on withdrawal (all exceptions based on limits) also under the brand-new tax obligation regimen. Only the worker payment to PF is no more tax obligation insurance deductible under the brand-new regimen.
Mahesh Nayak, legal accounting professional, CNK & & Associates
