Unresolved Issue on amendments related to Tax on Interest earned from PF contribution exceeding Rs. 5 Lakhs

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Unresolved Issue on amendments related to Tax on Interest earned from PF contribution exceeding Rs. 5 Lakhs

 

Ab amendment has been done on taxation of interest on PF contribution exceeding Rs. 5 Lakhs. But following are the issues which are still unanswered and CBDT need to come out with the clarification.
1.Suppose for  year 1, the excess employees contribution is Rs 5 Lakhs then employee will pay tax on interest income assume 8% on Rs, 40,000/-. Now how to compute the excess amount from year 2 onwards. There can be multiple options  and some are given below.
  • • On 5 Lakhs
  • • On 5.4 Lakhs
  • • On 5.40 lakhs minus applicable tax paid by employee.
Ideally, PF contribution above threshold amount should be in a separate account and the required amendment /modifications in the relevant rules are required for this.
2. EPFO is a trust and hence under section 194A not mandatory to deduct TDS on any interest payment. Thus in the absence of any TDS, how employees can compute the interest amount and offer for tax.
3. Issue arises as to what will happen if CBDT in any year end circular mandate that employers require to deduct TDS  under section 192B on the interest income.
4. How things will be different in case of employer is having their own PF trust. Can definition of employer will be extended to PF trust also as employer is only maintaining PF trust. In such scenario following questions were still unanswered.
  • • Is  TDS require on Interest payment
  • • If yes, who will deduct, Employer or employee
  • • Under which section TDS to be deducted 192B or 194A. 
5.   If EPFO will deduct TDS, then how EPFO will issue Form 16 or 16A to respective employees.
Hope all above issue is clarified by the CBDT soon. Till then, let us have our own individual approach.

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