InvestorQ : who will be affected by the government's move to split the PF accounts?
vani Patil made post

who will be affected by the government's move to split the PF accounts?

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Anjali Desai answered.
10 months ago
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In September 2021, the Indian government notified the new Income Tax rules, under which it announced that the Provident Fund (PF) accounts will be split into two. The main reason behind the move was to restrict people with high incomes from taking advantage of government-backed welfare schemes. The split is finally being implemented from April 1, 2022, thereby allowing the government to tax the Provident Fund income on employee contributions of over ₹ 2.5 lakh annually.

From April 1, the Central Board of Direct Taxes (CBDT) will divide all the existing PF accounts into two categories: Taxable and Non-taxable contribution accounts. While the former account will include their taxable income, the latter account will include their closing account as it stood on March 31, 2021. This new tax rule will be added under Section 9D of the I-T rule.

Furthermore, two separate accounts will be managed within the existing PF account for taxable interest calculation. These accounts will be maintained for the recently concluded financial year as well as for the preceding financial year. The main idea behind these accounts is to assess the taxable and non-taxable contributions made by an individual.

As per experts, the PF account split will allow for better computation of interest amount and will ensure that the government welfare scheme benefits only the needed. It will only ensure that high-earning individuals do not take advantage of these schemes and earn tax-free income in the form of guaranteed interest.


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