Taxability of Interest on PF contrbution

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This discussion clarifies the tax rules for interest earned on Provident Fund (PF) contributions. While interest on voluntary contributions up to £5 lakh is generally exempt, the situation changes when compulsory contributions, particularly those arising from pay revision arrears, cause the total fund to exceed this limit. Such excess interest may become taxable from the next financial year.

RAKESH

RAKESH (Querist)
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26 March 2021 Sir
PF contribution for an year includes the following
1.Monthly voluntary contribution.
2.Compulsory contribution as part of Pay revision.
3.Annual Interest Added to the Fund.
Is there any exemption for the above contribution for calculating the interest

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 March 2021 Annual interst added to the fund out of own contribution upto 5 lacs Exempted.

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RAKESH

RAKESH (Querist)
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26 March 2021 Sir
What about the compulsory contribution as part of Pay revision. Because , due to merging of pay revision arrear with provident fund 5 Lac limit exceeds otherwise it will be less than 4 Lac.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 March 2021 Such excess will be taxable from next financial year.

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