In budget 2021, the government has proposed to levy tax on provident fund income of high-income individuals.
With this, individuals contributing over Rs.2.50 lakh a year in provident fund will not be eligible to avail tax benefits at the time of withdrawal.
Currently, any income from provident funds is exempted from tax at the time of withdrawal. However, the budget 2021 has put contribution from high-income employees in exempt-exempt-tax structure.
Amit Maheshwari, Gurgaon based Chartered Accountant and a partner in M/s Ashok Maheshwary & Associates believes that the government would levy tax on the entire amount if the contribution exceeds Rs.2.50 lakh a year.
Another key announcement was relief to NRIs on retirement income. Currently, NRIs returning to India have to pay taxes on income accrued in their foreign retirement accounts. This is due to the mismatch in the periods of taxation. Besides, such individuals face difficulties in getting tax credits of taxed paid in India in foreign countries.
Keeping this in mind, the government has proposed to align taxation on income on foreign retirement benefit account.
Mumbai tax consultant ZM Kapasi said that the proposed norms would benefit the NRIs planning to settle down in India.
