Last Updated on May 2, 2024 at 9:49 am
In response to our recent article – Tax deductions available in the New Tax Regime from 1st April 2023 – a reader wants to know if the employer contributions made to the EPF are taxable in the new tax regime from 1st April 2023.
Employer contributions to the EPF are not part of an employee’s salary. And therefore, they are also not part of 80C. Thus the rules of the new tax regime (existing or revised in budget 2023) do not apply to them.
The employer contributions to EPF will continue to be tax-free in the new tax regime (current and revised in budget 2023), provided such contributions are less than or equal to Rs. 7.5 lakhs in a financial year. This limit also applies to NPS (10% of basics + DA for corporate employees and 14% for government employees) and superannuation schemes.
If an employee is part of the EPF, NPS and any superannuation scheme, then the total contribution should not exceed Rs. 7.5 lakhs for such contributions to be tax-free. Beyond this, it will be taxable as per slab in the hands of the employee.
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Employer contributions to the NPS are deemed to be part of our salary. They are deducted from the total salary via section 80CCD(2). This deduction is still applicable in the new tax regime (both current and revised in budget 2023).