The Employees’ Provident Fund Organisation (EPFO) has welcomed the rationalisation of the income-tax framework governing recognised provident funds, aimed at aligning tax provisions with the statutory structure under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Currently, differences in eligibility criteria, investment patterns, and employer contribution limits between income-tax rules and EPF provisions have led to compliance challenges and avoidable litigation. The latest changes seek to remove these inconsistencies.

Key Highlights:

• Exemption: Recognition under Income Tax Act, 2025 will now be available only to provident funds that have secured exemption under Section 17 of the EPF Act.

• Investment Norms: Investments will be governed by EPF regulations and subordinate legislation, with the earlier rigid 50% cap on government securities removed.

• Employer’s Contribution: Employer contributions will be subject to a monetary ceiling of ?7.5 lakh annually. Contributions exceeding this limit will be taxed as perquisites.

EPFO said the harmonisation will simplify compliance, reduce disputes, and create greater clarity for employers and employees, ensuring a more streamlined provident fund framework.