PF Income Tax Rationalization: The budget proposes reforms to the rules governing 'Provident Fund Trusts' that were previously exempt under income tax regulations. These trusts will now be brought completely in line with the rules of the Employees' Provident Fund Organisation (EPFO). This will eliminate any confusion regarding provident funds for private sector employees. The rules for private provident funds will now be the same as those of the EPFO. The retirement fund body EPFO ​​stated on Tuesday that the budget's proposal to simplify and standardize income tax rules is very beneficial. According to them, this will better serve the interests of those associated with provident funds and bring uniformity to all regulations.

In this regard, the Ministry of Labour stated that the Union Budget (2026-27) has aligned the income tax rules applicable to Recognized Provident Funds with the legal and administrative provisions of the EPF Act 1952 and the EPF Scheme 1952.  Previously, there was a difference between the rules for granting income tax exemption to private PF trusts and the rules under Section 17 of the EPF Act. This budget proposal will eliminate this difference.

According to the EPFO, the investment rules under the income tax law and those of the EPFO ​​are also different. Similarly, the limit for employer contributions is not the same under both laws. These differences confuse people and lead to unnecessary legal disputes. Now, according to the new rules, recognition under the income tax law will only be granted to those provident funds that have received exemption under Section 17 of the EPF Act 1952. Under Section 17, a company (employer) can obtain an exemption from filing monthly returns with the EPFO ​​and manage its own PF fund.

The investment norms of PF trusts will continue to follow the existing framework of the EPF. The strict limit (50%) previously set for investment in government securities has now been removed, meaning that investment options have become more flexible.

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