COMPHRENSIVE GUIDANCE ON TAXATION OF INTEREST ON EPF CONTRIBUTION EXCEEDING RS 2.5 LAKHS
- A&A Mishra Consultancy
- Aug 26, 2022
- 1 min read
In pursuance of notification issued by CBDT dated 31 Aug 2021, interest relating to contribution in provident fund exceeding specified limit of INR 2.5 lakhs shall be part of taxable income in the hand of assessee.
Lets understand the change brought in by government with the help of an practical illustration:
Mr. Suresh working in ABC Co. has opening provident fund balance as on 31.03.2021 amounting to INR 9 lakhs. Monthly contribution by him is INR 1 lakh. Interest accrued rate on PF account balance is 8.10%
Employee Name: Mr. Suresh
PF Statement for the year April 21 to Dec 21
| | Cumulative balance at the end of month in | Cumulative balance at the end of month in | Interest Accrued @8.10% | Interest Accrued @8.10% |
|---|---|---|---|---|---|
Period | Contribution | Non Taxable amount | Taxable amount | Non Taxable amount | Taxable amount |
Opening Balance | 900000 | | | | |
Apr-21 | 100000 | 100000 | 0 | 6750 | 0 |
May-21 | 100000 | 200000 | 0 | 7425 | 0 |
Jun-21 | 100000 | 250000 | 50000 | 7763 | 338 |
Jul-21 | 100000 | 0 | 150000 | 7763 | 1013 |
Aug-21 | 100000 | 0 | 250000 | 7763 | 1688 |
Sep-21 | 100000 | 0 | 350000 | 7763 | 2363 |
Oct-21 | 100000 | 0 | 450000 | 7763 | 3038 |
Nov-21 | 100000 | 0 | 550000 | 7763 | 3713 |
Dec-21 | 100000 | 0 | 650000 | 7763 | 4388 |
Total | 1800000 | | | 68516 | 16541 |
Particulars | Non taxable account | Taxable account |
C/B as on 31.03.2021 | 9,00,000 | - |
Contribution during the year | 2,50,000 | 6,50,000 |
Interest accrued during the year | 68,516 | 16,541 |
Total amount avilable in each account at the end of the year (C/B as on 31st Dec 21) | 12,18,516 | 6,66,541 |
*TDS on interest to be dedcuted @10%(where PAN available) (INR 16,541 @10%) | - | 1,654 |
Opening Balance as on 01.04.2022 | 12,18,516 | 6,64,887 |
*TDS on interest to be dedcuted @20% (where PAN is not available) (INR 16,541@20%) | | 3,308 |
Clarifications:
Applicability of the amendment: W.e.f 01 Apr 2021
Will interest on balance standing in PF account as on 01.04.2021 attract TDS: No
What is rate of TDS?
10% if PF account is linked with valid PAN,
20% if PF account is not linked with valid PAN (i.e., TDS rate would be double)
30% under Section 195 subject to provisions of DTAA; in case of non-resident.
Methodology of computation of TDS: Two separate PF account will be maintained henceforth – Taxable and Non taxable portion. Interest on balance in taxable portion will attract TDS
Yorumlar