he taxation provisions in respect of provident fund remained unchanged for several decades. However, the last couple of years has seen significant changes in the taxation on provident fund contributions and on the interest accrued thereon.
As per law, both the employer and the employee need to contribute 12% of their wages towards provident fund. Till March 2020, employer contributions up to 12% enjoyed a tax exemption. Any contributions in excess of 12% were liable to tax. However, as per Budget 2020, the aggregate employer contribution to Provident Fund, National Pension System and Superannuation Fund in excess of Rs 750,000 per annum and the interest thereon would be considered as a perquisite in the hands of the employee in the year of contribution. The employer has an obligation to consider such excess amount as perquisite in the hands of the employee and withhold taxes thereon. As is obvious, this amendment impacts high-income earning employees who meet the above criteria.
Sorce:https://www.financialexpress.com/money/income-tax/new-epf-rules-how-epf-contributions-will-be-taxed-now-here-is-all-employees-need-to-know/2216554/