PF contribution above 2.5lakhs

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Murali

26 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only upon withdrawal and not upon deposit – else it will double taxation – I am paying for something that I have even withdrawn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 (2)

Quick Summary

This discussion addresses concerns about paying tax on Provident Fund (PF) contributions exceeding £2.5 lakhs, even before withdrawal. While PF withdrawals are generally tax-exempt up to £2.5 lakhs, the excess amount is taxable. The tax is levied on the interest earned on contributions above this limit, reported in Form 16 under 'Other Sources'. It's advisable to consult with your finance team or a tax advisor to understand the specifics and explore strategies to manage this tax liability, such as staggered withdrawals or other tax-saving options.

Rama chary Rachakonda

Master in Accounts & high court Advocate

7021 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 However, it's understandable that you might feel it's unfair to pay tax on money that you haven't even withdrawn yet.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.

Aashok Kumar Sharma

Finance/Compliance Consultant

75642 Points Posted on 08 November 2026

Table 7(b) in Form 16: taxable PF interest:
• Form 16 Part B shows "Taxable interest on contributions to provident fund above Rs 2.5 lakh" (Rule 9D). It's taxable under Other Sources (not salary). The employer reports it for information.
• Report it in Schedule OS ("Interest accrued on contributions to provident fund to the extent taxable").
• If the employer deducted TDS on it (194A), claim the TDS.