Part of the Budget proposals, the tax will be on interest earned on contributions above Rs 2.5 lakh in a year. It will be applicable for perpetuity; what should you do if your contribution is above the threshold?

For the first time, the government has proposed to tax the employees’ provident fund (EPF), albeit only the interest income on contributions exceeding Rs 2.5 lakh in a year. In the recent Budget proposals, the government has proposed that tax exemption will not be available on interest income for the year on all contributions to provident funds exceeding Rs 2.5 lakh. While this may cause concern to all salaried individuals contributing to EPF, it will in fact impact only those who contribute more than Rs 2.5 lakh in a year — and it will not affect their existing corpus or the aggregate annual interest on that.