Become Govt. Certified GST Practitioner in just 58 hrs. Register Now!

Provident Fund Interest Rate

Shekhar (CA Final) (84 Points)

27 April 2011

Dear Sir/ ma'am,

Please tell me the exempted rate on PF is 8.5% or 9.5%.

regards,

Shekhar

Reply
Follow
Share

9 Replies

(Guest)

w.e.f 1.09.2010 intrest credited to PF is exempt upto 8.5% p.a

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

(Guest)

8.5%

1 Like

Sumit Bhargava (CA Student) (326 Points)
Replied 27 April 2011

Notification No. 69/2010 dated 26.08.2010

Notification of interest rate on RPF as 8.5% w.e.f. 1.9.2010, the interest in excess of which would be taxable as salary.

Rule 6 of Part A of the Fourth Schedule to the Income tax Act, 1961, provides, inter alia, that interest credited on the balance to the credit of an employee participating in a recognized provident fund in so far as it is allowed at a rate exceeding such rate notified by the Central Government, shall be deemed to have been received by the employee in the relevant previous year and shall be included in his total income.

Accordingly, the Central Government has notified, w.e.f. 1st September, 2010, in exercise of the powers conferred by Rule 6, 8.5% as the rate of interest on Employer’s annual contributions in a recognised provident fund. This implies that w.e.f. 1st September 2010 interest credited on the balance to the credit of the employee in excess of 8.5 percent shall be deemed to have been received by the employee in the previous year and shall be included in the total income of the employee. Prior to this date, the interest credited in excess of 9.5% was deemed to be the income of the employee.

Example : If interest @ 9.5% is credited in the provident fund account of the employee as on 31st March, 2011 for the year 2010-11, then, according to the above notification, the amount of interest credited upto 31.08.2010 (i.e. 9.5%) is exempt from tax and w.e.f 01.09.2010 the interest credited @ 1% (i.e. 9.5% - 8.5%) is deemed to be the income of the employee for A.Y.2011-12.

CA.Rakesh Kataria (CA ) (291 Points)
Replied 27 April 2011

Originally posted by : Sumit Bhargava
	Notification No. 69/2010 dated 26.08.2010 Notification of interest rate on RPF as 8.5% w.e.f. 1.9.2010, the interest in excess of which would be taxable as salary. Rule 6 of Part A of the Fourth Schedule to the Income tax Act, 1961, provides, inter alia, that interest credited on the balance to the credit of an employee participating in a recognized provident fund in so far as it is allowed at a rate exceeding such rate notified by the Central Government, shall be deemed to have been received by the employee in the relevant previous year and shall be included in his total income. Accordingly, the Central Government has notified, w.e.f. 1st September, 2010, in exercise of the powers conferred by Rule 6, 8.5% as the rate of interest on Employer’s annual contributions in a recognised provident fund. This implies that w.e.f. 1st September 2010 interest credited on the balance to the credit of the employee in excess of 8.5 percent shall be deemed to have been received by the employee in the previous year and shall be included in the total income of the employee. Prior to this date, the interest credited in excess of 9.5% was deemed to be the income of the employee. Example : If interest @ 9.5% is credited in the provident fund account of the employee as on 31st March, 2011 for the year 2010-11, then, according to the above notification, the amount of interest credited upto 31.08.2010 (i.e. 9.5%) is exempt from tax and w.e.f 01.09.2010 the interest credited @ 1% (i.e. 9.5% - 8.5%) is deemed to be the income of the employee for A.Y.2011-12.

AGREED , IT IS 8.5% W.E.F SEP 01, 2010.

IT WAS 9.5% EXEMPT FROM 1-4-2001 TO 31-8-2010.

I THINK ITS CLEAR NOW

1 Like

Arniv Sharda (CA Final) (3006 Points)
Replied 27 April 2011

Originally posted by : vinnzz
	w.e.f 1.09.2010 intrest credited to PF is exempt upto 8.5% p.a

cheers

Upgrade to CAclubindia Pro. Subscribe Now!

Aniket (afd) (24 Points)
Replied 28 April 2011

But for May attempt the rate applicable is 9.5% ..as suggested by icai and all other authors

Sumit Bhargava (CA Student) (326 Points)
Replied 29 April 2011

Originally posted by : Aniket
	But for May attempt the rate applicable is 9.5% ..as suggested by icai and all other authors

Dear friend, as per the recent amendment central Govt. has increased the rate of interest on the PF amount from 8.5% to 9.5%. -The Employees Provident Funds & Miscellaneous Provision Act, 1952

But for Income Tax, the Exempted rate on PF is 8.5%

Sandeep Himatsingka (SCM-Head) (85 Points)
Replied 19 May 2012

Last sentence NOT CLEAR

But for Income Tax, the Exempted rate on PF is 8.5%

Someone, please clarify.

Jitendra Fule (EXECUTIVE) (24 Points)
Replied 21 September 2012

Dear Friends,

As per my knowledge as on date it is 9.5 %.

To sort out the confussion of 8.5 % or 9.5 % , I submitt as:

1) The rate was 9.5 % from 2001

2) Govt had changed it to 8.5 % vide Notification No. 69/2010 dated 26.08.2010 w.e.f. 1.9.2010 .

3) However Govt has again changed it to back i.e. from 8.5 % to 9.5 % w.e.f.1.9.2010 vide NOTIFICATION NO. 24/2011 [F.NO. 142/14/2010-SO (TPL)], DATED 13-5-2011

In the above notification it is clearly mentioned that Notification no 69/2010 is suppressed. The notification is reproduced as below ( available on Income tax site)

S.O.1046(E).– In exercise of the powers conferred by clause (b) of rule 6

of Part A of the Fourth Schedule to the Income-tax Act, 1961 (43 of

1961), and in supersession of the notification of the Government of India

in the Ministry of Finance (Department of Revenue) number S.O.

2091(E), dated the 26th

August, 2010, the Central Government hereby

fixes, with effect from the 1st

day of September, 2010, 9.5 per cent., as

the rate referred to in the said clause.

[Notification No. 24/2011/F.No.142/14/2010-SO (TPL)]

(Vivek Anand Ojha)

Under Secretary to the Government of India