Calculation of taxable interest relating to contribution in PF exceeding specified limit

Income Tax Rule 9D- Calculation of taxable interest relating to contribution in a provident fund or recognised provided fund, exceeding specified limit

CBDT vide Notification No. 95/2021 dated 31.08.2021 has notified the Income-tax (25th Amendment) Rules, 2021. They shall come into force on 1st day of April, 2022. In the Income-tax Rules, 1962, a new Rule namely Rule 9D related Calculation of taxable interest relating to contribution in a provident fund or recognised provided fund, exceeding specified limit has ben inserted as under:

9D. Calculation of taxable interest relating to contribution in a provident fund or recognised provided fund, exceeding specified limit

It has been provided that for the purposes of the first and second provisos to clauses (11) and (12) of section 10 , income by way of interest accrued during the previous year which is not exempt from inclusion in the total income of a person under the said clauses shall be computed as the interest accrued during the previous year in the taxable contribution account.

Further, for the purpose of calculation of taxable interest as above, separate accounts within the provident fund account shall be maintained during the previous year 2021-2022 and all subsequent previous years for taxable contribution and non-taxable contribution made by a person.

It has been clarified that non-taxable contribution account shall be the aggregate of the following, namely:-

(i) closing balance in the account as on 31stday of March 2021;

(ii) 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

(iii) interest accrued on sub-clause (i) and sub-clause (ii),

as reduced by the withdrawal, if any, from such account;

Also, taxable contribution account shall be the aggregate of the following, namely:-

(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(c) 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.

Download CBDT Notification No. 95/2021 Click Here >>

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