Скачать или смотреть PF | Section 17(2)(viia) | Rule 3B | Salary by CA Pradeep Kalra | Income Tax Act 1961 | Part-3 |

PROVIDENT FUND: SECTION 10(11), SECTION 10(12), SECTION 10(13)
Under this retirement scheme, the employee invests certain portion of his salary to a sinking fund which is maintained by the employer or government. Generally, employers also contribute an equal amount into the same sinking fund. This aggregated amount is invested in some securities and interest income from it. This interest income is again credited to the sinking fund account of the employee. This sinking fund is known as Provident Fund and it consists of:
(a) Employee’s contribution
(b) Employer’s contribution
(c) Interest on employer’s contribution
(d) Interest on employee’s contribution

The following are the kinds of Provident Funds
(a) Statutory provident fund
(b) Recognized provident fund
(c) Unrecognized provident fund
(d) Public provident fund


(a) STATUTORY PROVIDENT FUND (SPF): SECTION 10(11)
Statutory Provident Fund is applicable to the employees of Government, Semi Government organizations, Local Authorities, Railways, Recognized Educational Institutes and Universities. Tax treatment of SPF is given here under

TREATMENT OF EMPLOYER ’S CONTRIBUTION TO SPF:
It is income for the employee under the head of Salary but it is exempt u/s 10(11).

INTEREST CREDITED TO THE SPF ACCOUNT DURING THE YEAR:
It is income for the employee under the head of Salary but it is exempt u/s 10(11).

(b) TAX TREATMENT OF RPF
TAX TREATMENT OF EMPLOYER’S CONTRIBUTION TO RPF:
It is income for employee under the head of Salary but it is exempt to the lower of
(1) 12% of Standard Salary
(2) Actual contribution done by employer.

INTEREST CREDITED TO THE RPF ACCOUNT DURING THE YEAR: It is income for the employee under the head of Salary but it is exempt u/s 10(12) to the lower of
(1) 9.5% p.a. of total contribution
(2) Actual amount of interest credited to the RPF account

Note: However, the exemption under section 10(11) or 10(12) would not be available in respect of income by way of interest accrued during the previous year to the extent it relates to the amount or the aggregate of amounts of contribution made by that person/employee exceeding ` 2,50,000 in any previous year in that fund, on or after 1st April, 2021.
If the contribution by such person/employee is in a fund in which there is no employer’s contribution, then, a higher limit of ` 5,00,000 would be applicable for such contribution, and interest accrued in any previous year in that fund, on or after 1st April, 2021 would be exempt upto that limit.
It may be noted that interest accrued on contribution to such funds upto 31st March, 2021 would be exempt without any limit, even if the accrual of income is after that date.

(c) TAX TREATMENT OF UNRECOGNIZED PROVIDENT FUND (URPF):

TAX TREATMENT OF EMPLOYER’S CONTRIBUTION TO URPF:
It is income for the employee under the head of Salary but it is fully exempt during the year of contribution of employer.

INTEREST CREDITED TO THE URPF ACCOUNT DURING THE YEAR:
It is income for the employee under the head of Salary but it is fully exempt during the year of credit to the account.

The Finance Act 2020 introduced a new provision under the Income-tax Act, 1961 (the Act) by virtue of which employer contribution exceeding ` 7.5 lakhs p.a. (i.e. excess contribution) in aggregate to the following funds is now taxable in the hands of the employee as perquisite:

Section 17(2)(vii) The amount or aggregate of amounts of any contribution made
in a recognised provident fund
in NPS referred to in section 80CCD(1)
in an approved superannuation fund
by the employer to the account of the assessee, to the extent it exceeds ` 7,50,000

Section 17(2)(viia) Any annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the recognized provident fund or NPS or approved superannuation fund to the extent it relates to the employer’s contribution which is included in total income in any previous year under section 17(2)(vii) computed in prescribed manner.
In other words, interest, dividend or any other amount of similar nature on the amount which is included in total income under section 17(2)(vii) would also be treated as a perquisite.

The CBDT has, vide Rule 3B, notified the following manner to compute the annual accretion by way of interest, dividend or any other amount of similar nature during the previous year-
TP = (PC/2)*R + (PC1 + TP1)*R

What is Rule 3B of Income Tax Act