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PF contribution above 2.5lakhs

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Murali

5 Points Posted on 06 September 2024

I am a salaried employee of a private company.

This year in form 16, i was shown an entry in Table 7(b) "Add: Any other income reported by the employee under section 192(2B)"

"Income uinder the head other sources offerd for TDS" and the amount was added to my total income.

When i checked with my finance team, they told me that this amount was the excess above 2.5Lakhs of my PF saving and so i must report and pay tax.

Now, how is it fair that i pay tax even prior to withdrawal of that money?

I did some reading on section 10

The rule says “as reduced by withdrawal” – which means that this tax will be applicable only upon withdrawal and not upon deposit – else it will double taxation – I am paying for something that I have even withdrawn

https://www.datocms-assets.com/40521/1630982363-a-it-95-notification.pdf

Can some learned person guide if this is correct?

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9615 Points Posted on 18 September 2024

I understand your concern. It seems like you're referring to the tax implications on your Provident Fund (PF) withdrawals. In India, PF withdrawals are tax-exempt up to a certain limit, which is currently ₹2.5 lakhs. If the withdrawal amount exceeds this limit, the excess amount is taxable. The tax liability arises because the excess amount is considered as income, and therefore, subject to taxation. However, it's understandable that you might feel it's unfair to pay tax on money that you haven't even withdrawn yet. You may want to discuss this further with your finance team or consult a tax advisor to explore possible options. One possible solution could be to consider withdrawing the excess amount in installments over a few years to minimize the tax liability. Additionally, you can also explore other tax-saving options, such as investing in tax-exempt instruments or seeking tax deductions under other provisions of the Income-tax Act. Remember, tax laws and regulations can change, so it's always a good idea to stay informed and consult with a tax professional to ensure you're meeting your tax obligations while minimizing your tax liability.