EPFO Hails Income Tax Rationalisation for Private PF Schemes

The Employees’ Provident Fund Organisation (EPFO) has welcomed the Union Budget 2026-27 proposal to revise income tax provisions for recognised private provident fund trusts, as per PTI report.  

The labour ministry said the changes align tax rules with the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and the EPF Scheme, 1952. The aim is to remove differences between the 2 sets of provisions. 

Recognition Tied to EPF Exemption 

Under the revised structure, recognition under the Income Tax Act, 2025, will apply only to provident funds that have secured exemption under Section 17 of the EPF Act, 1952.  

This provision allows employers to maintain their own provident fund trusts instead of filing monthly EPF returns, subject to regulatory conditions. 

Earlier, the eligibility requirements for tax recognition and EPF exemption were not the same. 

Earlier Gaps in Rules 

As per the report, officials said there were differences between income tax provisions and EPF rules in areas such as exemption eligibility, contribution limits, and investment patterns.  

Recognised provident funds are governed by Schedule XI of the Income Tax Act, 2025, while EPF provisions are covered under separate legislation. These variations often led to compliance issues and legal disputes. 

Investment Norms Brought in Line 

The Budget aligns the investment rules for recognised provident funds with those followed under the EPF framework.  

The statutory ceiling that restricted investment in government securities to 50% has been removed. Investment decisions will continue to be regulated under EPF guidelines and related laws. 

Employer Contribution Ceiling 

The employer’s contribution will be subject to a monetary ceiling of ₹7.5 lakh per year. Any amount above this threshold will be treated as a taxable perquisite for the employee. Earlier, the contribution limits under the income tax and EPF frameworks were not aligned. 

Read More: No Major EPFO Changes in Budget 2026, but EPFO 3.0 Reforms Are Lined Up! 

Conclusion 

The EPFO said the revised tax provisions clarify that provident fund exemptions are governed by the EPF Act, 1952. The alignment of tax recognition, investment norms, and contribution limits is expected to reduce inconsistencies for private provident fund trusts. 

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