TDS u/s 194A is to be deducted at the time of credit of interest or payment thereof whichever is earlier. As per the new provision inserted in sec 10(11), interest earned on provident fund contribution to the extent it relates to interest on employees contribution in excess of Rs.2.5lakhs will not be exempt u/s 10(11). Accordingly, provident fund trust are required to deduct tax on such interest. But the interest rate applicable for previous year is declared by EPFO after 31st march and most of the time after 31st may (the last date of filing etds). The interest at such rate is credited as on 31st march of previous year but the amount is crystallised only when the rate is declared. e.g. for year 21-22, rate of interest is declared on 3-6-2022. Here can we take a stand that 3-6-2022 is the date of credit and not 31-3-2022. Accordingly TDS will be deducted in fy 22-23 and employees will also show such income as income for FY 22-23.
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