Income Tax Rules for calculation of taxable interest relating to contribution in a provident fund
CENTRAL BOARD OF DIRECT TAXES [CBDT] has released Income Tax Rules for the calculation of taxable interest relating to contribution in a provident fund.
Separate accounts within the provident fund account shall be kept for taxable and non-taxable contributions made by a person during the prior year 2021-2022 and all subsequent previous years for the purpose of calculating taxable interest.
The total of the following shall constitute the non-taxable contribution account:
1. the account’s closing balance as of March 31, 2021;
2. any contribution made by the person in the account during the previous year 2021-2022 and subsequent previous years, which is not included in the taxable contribution account; and
3. interest accrued on sub-clauses 1 and 2, as reduced by any withdrawals from such an account;
The taxable contribution account shall consist of the sum of the following:
(i) contribution made by the person in a previous year in the account during the previous year 2021-2022 and subsequent previous years, which is in excess of the threshold limit; and
(ii) interest accrued on sub- clause (i), as reduced by the withdrawal, if any, from such account; and
The threshold limit shall mean:
(i) five lakh rupees, if the second proviso to clause (11) or clause (12) of section 10 is applicable; and
(ii) two lakh and fifty thousand rupees in other cases.