Tax applicable on 1% increase in EPF ? How ethical ?

POSTED BY Jagoinvestor ON September 25, 2010 11:24 am COMMENTS (9)

Recently there is a news that the increase in EPF interest of 1% will be taxable . How sensible , ethical is this to tell now after the news of increase in interest rates , Is it killing the happyness later by Govt ? Read this

NEW DELHI: The government’s surprise gift for workers isn’t much of a gift after all. The labour ministry has hiked the employees’ provident fund, or EPF, rate to 9.5%, but a finance ministry notification says that anything in excess of 8.5% will be taxed.

The labour ministry is, however, confident that the tax department will renotify the higher rate, as otherwise a lot of contentious issues will come up. Labour Minister Mallikarjun Kharge had declared a 9.5% bonanza on provident fund deposits on September 15 — marking a one percentage point increase in the rate from the 8.5% paid in the last five years. “

9 replies on this article “Tax applicable on 1% increase in EPF ? How ethical ?”

  1. SRDKVV says:

    All said and done, the intent of having EPF and making returns tax free was to ensure folks have a secured (tax free) futue. Just because interest rate got hiked by 1% this year does not mean that this excess (additional 1% interest) should be taxed. If all would have been well (which does not happen too often in government establishments), goof up they found now should not have happened and this “suddenly found” excess amount should have been distributed as additional interest in previous years itself, tax free.

    So not only govt made a mistake but they are also gaining by taxing common man for a mistake made by government !!!!!

    So, does what happens this year given them a right to continue making mistake in future over many years, then find out one fine morning that they made a mistake (again), increase interest rate for that year alone and tax the common man for this additional income 🙂 Way to go Chidambaram…

  2. dharmchandra agrawal says:

    Dear reader,
    “jo hamare control me nahi hei,uske liye tension palane ka koi fadya nahi hei”
    just remember
    more then 80% ,they have lots of charges——————-if any other have that,he/she may be have in jail,and make rules for us,they never know ,what is rule.

  3. Shreenarayanan says:


    This year they are ready to give 1% tht is fine but how they are going to give for consecutive years? From where they will generate money?


    1. As per EPF board, this 1% increase is ONLY for this year. From next year, interest rate will be back to normal rate.


      1. Did EPFO mention that from next year it will come back to 8.5% ? can you give a link which says that they have decided it from now itself ?


        1. The following link clearly mentions that this rate hike is only for this year.

          Quotes from the link
          “We can distribute only what is available in the interest suspense account. Since we had a surplus this year, the interest rate was increased. This cushion will not be available next year,” said the official.”

          Hope it will help you

      2. Shreenarayanan says:

        Hi MoneySavingsHelp,

        I actually saw in a newspaper tht it is going to continue for consecutive years.Please let me know if i am wrong my friend?


  4. That’s the old method of Govt. of India. Many times they increase DA / HRA or other interest rates, & at the same time, they increase the income tax rates. This is not right. But, in India, we have dictatorship of some politicians in democratic way. 🙂


  5. rakesh says:

    I think its wrong for the government to tax EPF. EPF is basically for a retirement, something like PPF. If PPF is not taxed then why should EPF be taxed.


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