In FY2021-22, I submitted 4.5 lakh in VPF. my share in epf 95,000 and the employer’s share is 80,000. I have not yet received the interest for FY2021-22 in my PF account. After the excess amount of PF from the financial year 2021-22, the interest is taxable. 2.5 lakhs. So what is the tax liability for FY2021-22 in my case?
—Deepak Gupta
We understand that during FY2021-22, you have contributed 5.45 lakh towards Employees Provident Fund (EPF) account ( 95,000 towards Statutory EPF and 4.5 lakh as voluntary PF). Further, we have assumed that your PF account is with the Employees’ Provident Fund Organization (EPFO) and not through your employer’s private PF trust.
As per the provisions of the Income Tax Act, 1961, if the EPF contribution by the employee exceeds 2.5 lakhs during the financial year, interest earned during the year on such additional contribution will be treated as taxable income at normal tax slab rates. There is a prevailing view that since interest is in the nature of income from other sources, it can be offered to tax as per the method of accounting regularly employed by the individual i.e. cash or mercantile. It is also debatable whether such interest is taxable from year to year or only on withdrawals.
As per the specified mechanism, separate accounts (for taxable contributions and non-taxable contributions made by an individual) by the EPFO for interest on the respective contributions are to be maintained within the PF account of the individual.
Income Tax Rules clarifies that refund of income tax exemption is possible (from 1st April 2021) as it includes any interest on balance in EPF account as on 31st March 2021 as part of ‘Non-taxable contribution account’ .
Further, the EPFO circular dated 5th April 2022 has outlined the method of calculation and deduction of Tax Deducted at Source (TDS) by the payer. The said circular provides that the effective date of TDS will be 1st April 2022 and tax will be deducted at source on such interest income (i) at the time of credit of interest to the EPF account of the employee or (ii) final settlement/transfer (whichever is earlier). be later, in case of final settlement). Since the EPFO is yet to credit the interest in the PF account for FY 2021-22, practically, it remains to be seen whether the interest income and TDS deducted thereon by the EPFO will be credited by them for FY 2021-22 or FY 2021-22. Will be reported in the year 2022-23. It also remains to be seen in which financial year, the relevant TDS will be reflected in Form 26AS.
Therefore, the employee can choose to report the interest income in the relevant financial year. If there is any mismatch between the financial year of income reporting and tax deduction, the same will need to be clarified/reported accordingly.
If you have already filed tax return for the financial year 2021-22, depending on the financial year in which the TDS entry is appearing in your Form 26AS, you can apply for the tax return by 31st December 2022 to claim the credit. (if necessary) can be modified. TDS.
Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India.
catch all business News, market news, today’s fresh news events and breaking news Updates on Live Mint. download mint news app To get daily market updates.