Is Interest Earned By Employee Provident Fund Taxable?

Union Budget 2021 has proposed to impose income tax on interest earned by an employee/person on his/her contribution in excess of Rs 2.5 lakh in a financial year to a provident fund. On a plain reading of the budget documents, it appears that tax will apply to the interest earned on contributions made to Employees' Provident Fund (EPF), Voluntary Provident Fund (VPF) as well as Public Provident Fund (PPF). However, tax experts have clarified that there are separate limits for EPF/VPF and PPF . Which means contributions to PPF and EPF/VPF will not be aggregated for the purpose of calculating the Rs 2.5 lakh limit. Detailed Explanation Presently in EPF contribution consists of 12% of the basic salary from Employees account and additional 12% of the basic salary from Employers account. In total 24% of the basic salary will be added in EPF account every month. But Employees have an option to increase their contribution from 12% to 100% and the additional contribution also earns the