The Employees’ Provident Fund Organisation (EPFO) has welcomed the rationalisation of the Income Tax regime for Recognized Provident Funds announced in the Union Budget 2026–27, which aligns the provisions of the Income Tax Act, 2025 with the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the EPF Scheme, 1952. Under the revised framework, income tax recognition will be available only to provident funds exempted under Section 17 of the EPF Act, investment norms will be governed solely by the EPF framework with removal of the rigid 50% cap on government securities, and the employer’s contribution will be tax-exempt up to a monetary ceiling of ₹7.5 lakh, beyond which it will be taxed as a perquisite. This harmonisation is expected to reduce ambiguity, minimise litigation, and bring greater clarity and consistency in the taxation and regulation of provident funds.
