What are the new I-T rules on PF savings?

Why has the government decided to implement a fresh tax on Provident Fund contributions? Has the limit been raised?

: The Finance Ministry on Tuesday to implement a fresh tax on Provident Fund (PF) savings. In her Budget 2021-22 speech, Finance Minister Nirmala Sitharaman had proposed taxing the income on PF contributions of over ₹2.5 lakh a year. This limit was later enhanced to ₹5 lakh for PF accounts where employers make no contributions. However, there was a lack of clarity on how this tax was to be levied that the new rules seek to address. Till this year’s Budget, all income on provident fund savings was exempt from tax. The provision aimed at ensuring people retire with an adequate nest egg was being misused, according to the Finance Ministry. Ms. Sitharaman, asserted in her Budget speech that ‘some people go to the extent of contributing ₹1 crore each month’ (into their PF accounts). For such people to get tax concessions as well as an assured income, is not comparable with an employee who earns ₹2 lakh and gets 8% return on their PF savings, she said. “This exemption without any threshold benefits only those who can contribute a large amount to these funds as their share,” the Budget documents explained.