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#EPF tax rules understanding
Employee contributions above 2.5L in FY will be taxed on the "interest earned"
EPF rate FY22 - 8.1%
Employee contributions above 2.5L in FY will be taxed on the "interest earned"
EPF rate FY22 - 8.1%
For example, you have made a 5L total contribution to EPF (Only employee contribution counts here and employers!)
5-2.5L = 2.5L additional contribution
Let's say in you're in a 30% tax bracket
EPF rate is 8.1%
2.5L*8.1% = 20250 interest earned
20250*30% = 6075 pay tax
5-2.5L = 2.5L additional contribution
Let's say in you're in a 30% tax bracket
EPF rate is 8.1%
2.5L*8.1% = 20250 interest earned
20250*30% = 6075 pay tax
#EPF
20250-6075 = 14175 post tax return
That means the actual return is 5.6%, not 8.1%
What we need to understand is in the next FY, your principal and interest still get 8.1% interest and that's not taxed!!!!
2.5L+14175 = 264175
264175 * 8.1% = 21398 interest earned
20250-6075 = 14175 post tax return
That means the actual return is 5.6%, not 8.1%
What we need to understand is in the next FY, your principal and interest still get 8.1% interest and that's not taxed!!!!
2.5L+14175 = 264175
264175 * 8.1% = 21398 interest earned
