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PF Interest Rates increased to 9.5%
Introduction
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In this article I will explain the changes done by Employees Provident Fund Organisation (EPFO) to increase the interest rates of Employee Provident Fund (EPF). It is good news for the employees who are derogatorily saving the money into the PF account. The debate for this changes ha been for nearly six months, finally EPFO has announced this decision Sep 16, 2010. Read the following sections for more details.
EPF Interest Rates
The existing rates for PF account is 8.5% p.a. The interest amount is cumulative for each month. That is the reason why PF is one of the best savings plan for the employees. The EPF rate has been 8.5% since 2005-06. The decision was taken by the Central Board of Trustees (CBT) of the EPFO. Company-run PF trusts could be affected as they are required to match the EPFO rate. EPFOs estimated 2010-11 earnings would only support a payout of 8.5% and the decision to provide 9.5% interest rate would result in a deficit of about Rs 1,600 crore. Another bad news is that, if the PF account is idle for more than three years, they there will not be any interest paid for that account. That means if you leave a company and leave the PF account. It will earn the interest for first three years.
Summary
This hike will be benefited by the salaried people to match with the increase in the inflation. Inflation is the main reason why the PF rate is increased. If you have any doubts please post it in the comments section.
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Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs 10 lakhs
1. (1) This Act may be called the Payment of Gratuity (Amendment) Act, 2010. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Amendment of section 4 of Act 39 of 1972.
2. In section 4 of the Payment of Gratuity Act, 1972, in sub-section (3), for the words three lakhs and fifty thousand rupees, the words ten lakh rupees shall be substituted.
In a move that will provide relief to the salaried class, the Union cabinet on Thursday(04.03.2010) gave its consent for enhancing the gratuity limit at the time of retirement to Rs 10 lakh. The government will bring an amendment to the gratuity Act by tabling a fresh bill in the current session of Parliament in the coming days. The move comes after several representations by employees' groups. They had asked for a removal of gratuity ceiling. To join, send an SMS as:
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The current enhancement is way above the current limit of Rs 3.5 lakh, sources said. It will provide relief to employees at retirement. Often, central and state government staff with high incomes did not get the full amount accrued in gratuity. With the enhancement of the limit, they will get more benefits at the time of retirement. Employees expected the benefit to be announced in the budget. But with the UPA government bringing a new bill in the same session, the concerns will be addressed. Whether Income Tax Limit In respect of gratuity Increased?
After reading above news ,First response of all person is that "whether Income tax limit 3.5 Lakh about gratuity Increased or not? Before Answering the question ,I will explain you the provision about Gratuity as per Income Tax act. As per Income Tax act ,Section 10(10),employees has been divided in three categorise. 1. Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit. 2. Employee covered under Payment of Gratuity Act:Amount as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced by the Cabinet as proposed ,Income tax Limit will also enhanced.As theincome Tax act only refer the Payment of gratuity act . 3. Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .In case of Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause[10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt .
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