Many salaried people are still trying to understand how the provident fund benefits work under the new tax regime. Experts say it is important to know which deductions are allowed and which ones are not, especially when comparing the old and new tax regimes for the current financial year.

According to CA Dr Suresh Surana, employees can no longer claim a tax deduction for their own PF contribution when they choose the new regime under Section 115BAC. He explains that although the PF amount will still be deducted from the employee’s salary each month, it will not reduce taxable income. This point is essential for anyone comparing the two tax regimes before filing their return.

Surana says, "Under the new tax regime (Section 115BAC), the employee’s own contribution to PF (EPF) does not qualify for deduction, as the deductions available under Section 80C, which normally cover PF contributions, are not permitted. Therefore, while the PF amount may still be deducted from the employee’s monthly salary for statutory purposes, it does not reduce taxable income under the new regime. However, it is important to distinguish between two aspects:

• Employer’s contribution to PF is not taxable up to 12% of salary, subject to the overall limit on recognised provident fund.

It is pertinent to note that actual tax liability may vary depending on the taxpayer’s detailed salary structure, eligible exemptions, allowances, perquisites, deductions, surcharge applicability, etc.

This clarification offers a simple way for taxpayers to understand how PF benefits change under the new rules. Anyone deciding between the old and new tax regimes should carefully review their salary structure to see how these rules affect their final tax bill.