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Tds 192a

Shivani (Learner) (1881 Points)

06 November 2016

Dear Friends

In EPF we can withdraw some amount for specfied purposes like marriage etc.

My question is will TDS under section 192A apply in such cases?

Section 192A says to deduct TDS 10% on accumulated balances due where it forms of total income of employee in a case where provisions of rule 8 of Part A of the Fourth Schedule not being applicable.

now accumualteed balance due is what standing to the PF account of employee at the time of retirement (definitiion given in Part A Fourth Schedule).

But in case of marriage we are not withdrawing amount at the time of retirement but during the employment to meet specified exigency. So in my whey it cannot be considered as "accumulated balance due" and hence section 192A should not apply in such cases.

Please share your view.

regards

shivani

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2 Replies

Arvind Venkat (STUDENT) (15 Points)
Replied 06 November 2016

SOURCE : https://www.taxsutra.com/experts/column?sid=395

Under the existing dispensation the Part A of Fourth Schedule provides rules governing the Recognised Provident Funds (RPF) established as per the scheme framed under EPF and Misc. Provisions Act, 1952.

Section 10 (12) provides that accumulated balance due to an employee is exempt from tax subject to the condition that such balance conforms to the extent provided in rule 8 of Part A of the Fourth Schedule of the Income Tax Act. Conditions enumerated in clauses (i), (ii) and (iii) in the said rule 8 are required to be fulfilled in order to get such exemption. The expression accumulated balance due is defined in rule 2(f) of Part A of Schedule IV to mean balance due or claimable by the employee on the day he ceases to be an employee of the employer maintaining the RPF. The said clauses of rule 8 provide as follows-

Clause (i)- The tax exemption would be available to the balance due in the account of employee if he has rendered continuous service for a period of five years
Clause (ii) provides that tax exemption would be available if the services are terminated by reason of employee's ill health or contraction or discontinuance of employer's business or for any other reason beyond control of the employee.
Clause (iii) provides that the tax exemption would be available if employee obtains other employment and the balance in the EPF account is transferred to the EPF maintained by the subsequent employer. Period of continuous service in such a case would also include period of service with the former employer

The balance due in the RPF has been interpreted to be balance accumulated in the account of the employee/s during the currency of employment and not the amounts credited post cessation of the employment and interest credited in the account post cessation of the employment would attract tax deduction at source under Section 194 A owing to non applicability of the provisions laid down in the aforesaid rule 8 in the case of the concerned employee. ( ONGC Ltd. Hon'ble ITAT Delhi Bench 4 SOT 333).

Rule 9 of Schedule IV provides that in case where balance in the employee's account in RPF is included in the total income owing to non application of aforesaid clauses of rule 8 then the tax liability of the concerned employee is to be recomputed by treating the contributions as contributions made to unrecognised PF for the respective years.

Difficulties are faced by the trustees of RPF to get information of the year wise taxability viz. taxable income and the tax payable for the purpose of recomputing the tax liability of the concerned employee.

Finance Bill 2015 proposes to insert a new provision viz. Section 192A with effect from

1st June 2015 for tax deduction at source at the rate of 10% in a case where the accumulated balance due to an employee participating in RPF is not exempt from tax owing to non applicability of the aforesaid provisions of rule 8 Part A of the fourth schedule of the Income Tax Act at the time of payment of such accumulated balance.