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Wednesday, Sep 28, 2022

CBDT notifies rules to calculate taxable interest in provident fund accounts

According to the Income-tax (25th Amendment) Rules, 2021, for the purpose of calculation of taxable interest, separate accounts within the provident fund account shall be maintained during 2021-2022 and all subsequent years for taxable and non-taxable contributions made by a person.

The Central Board of Direct Taxes (CBDT) has notified the income tax rules in which interest income accrued in the provident fund (PF) above a specified limit will be taxed.

According to the Income-tax (25th Amendment) Rules, 2021, for the purpose of calculation of taxable interest, separate accounts within the provident fund account shall be maintained during 2021-2022 and all subsequent years for taxable and non-taxable contributions made by a person.

The new rule states that non-taxable contribution account shall be aggregate of the closing balance in the PF account as on March 31, 2021, and any contribution made by the person in the account in 2021-2022 and in subsequent years, which is in excess of the threshold limit.

The new rule shall come into force on April 1, 2022, the CBDT notification said.

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The government had introduced a new provision earlier this year that makes interest accrued in PF account on contribution above Rs 2.5 lakh a year taxable for non-government employees. For government employees, the PF threshold is Rs 5 lakh.

First published on: 02-09-2021 at 03:48:06 pm
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