How to Calculate Tax ability of Interest on Access to Contribution - New Threshold Limit and Assumption of Tax Computation 

 1. Additional tax interest on additional PF contributions dated 11.02.2021 of in this article, to explain the new threshold of tax exemption and the method of tax calculation.

 

2. The government has increased the threshold for deposits in the Provident Fund by Rs 5 lakh per annum, for which interest-free tax will continue if no employer contributes. The announcement by Finance Minister Nirmala Sitharaman during the passage of the bill in the Lok Sabha on March 23 was part of the amended parts of the 2021 Finance Bill.

 

3. Provident funds where employees do not contract: The General Provident Fund (GPF) is a provident fund where employers do not contribute.

 

Thus, the proposed amendment by The Finance Minister Nirmala Sitharaman to the budget provision relating to the capping of employees' provident fund contributions for tax exemption is only for general provident fund customers.

 

You may also, Like- Prepare at a time 50 Employees Form 16 Part B for the F.Y.2020-21 as per new and old tax regime [This Excel Utility can prepare at a time 50 Employees Form 16 Part B as per U/s 115 BAC]

 

4 What is General Provident Fund (GPF)? General Provident Fund (GPF) is a type of PF account available only to government employees in India. 

All temporary of permanent government employees, and re-employed pensioners (except those eligible for the Contributory Provident Fund) must compulsorily subscribe to GPF after one year of uninterrupted service.

 

The amount of GPF subscription is determined by the customer himself. However, the contribution rate should not be less than 6% of the total employee grant. The maximum contribution is 100% of the employee's salary.

 

The interest rate of GPF fund is revised from time to time by the Government based on the existing market interest rate.

 

5. The increased marginal limit in the Provident Fund is Rs. 5 lakhs per annum, for which interest tax exemption will continue only for General Provident Fund and there is no change in the provisions for general EPF customers, where both employer and employee contribute at least 12% of basic plus DA each and Contributions for interest includes 2.5 Lacks.

6. Employee Private Fund: The Employee Provident Fund (EPF) is available to salaried people in the organized sector and contributes to the fund by both the employee and the employer.

You may also, Like- Prepare at a time 100 Employees Form 16 Part B for theF.Y.2020-21 as per new and old tax regime [This Excel Utility can prepare at a time 50 Employees Form 16 Part B as per U/s 115 BAC]

 

EPF is a government-backed saving scheme that provides social security nets to workers in the organized sector.

 

It has been made mandatory for any company having 20 or more employees to register under the EPF scheme and provide its benefits to its employees.

 

The EPF is managed by the Employees Provident Fund and the Employees Provident Fund Organization (EPFO) under MISS. Provisions Act, 1952 195

 

Employees listed under EPF will have to contribute 12% of their initial salary to the EPF fund and the employer will contribute equally on a monthly basis.

 

The interest rate on EPF funds is decided by the Government from time to time which is currently fixed at 7.50%.

 

7. Voluntary Provident Fund (VPF) Voluntary Retirement Fund Contributes voluntary funds from the employee to his or her future fund account. This contribution is outside the 12% contribution of an employee to his EPF. The maximum contribution is up to 100% of his basic salary and value-added allowance. The interest rate is earned at the same rate as EPF.

 

The VPF option is only available to salaried individuals who pay their monthly dues through their fixed salary account.

 

VPF is an extension of EPF. In an EPF account, a person is required to fund his 12% basic salary and value-added allowance. In any VPF, it is the volunteer contribution that is mostly limited to 100%.

 

8. The Employees Provident Fund (EPF) for the organized sector, the GPF for government employees, and the Public Provident Fund (PPF) for all resident Indians are the three main provident funds.

 

9. Budget 2021-22 rationalizes tax-free income on the provident fund contributions of high-income earners by waiving interest income earned on EPF and VPF applicable annual contributions.

You may also, Like- Prepare at a time 50 Employees Form 16 Part A&B for the F.Y.2020-21 as per new and old tax regime [This Excel Utility can prepare at a time 50 Employees Form 16 Part B as per U/s 115 BAC]

10. The government has not been informed how the interest will be calculated. However, an attempt has been made to explain the method of calculating interest with the help of an illustration.

 

11. Retirement: Mr. Suresh Kumar is a salaried employee, Employee Provident Fund (EPF), and his legitimate contribution to the volunteer is as follows: -

 

Sl	Particulars	FY 2021-22	FY 2022-23
(a)	Basic +DA	Rs 1,00,000 pm	Rs 1,20,000 pm
(b)	Contribution in VPF	Rs. 18000 pm	Rs. 20000 pm
(c)	Statutory Contribution	Rs. 12000 pm	Rs. 14400 pm
(d)	Rate of Interest	8.5% pa	8.5% pa

 

MMYY	Monthly Contribution ( EPF + VPF)	Cumulative Balance is available at the end of the month.	Interest @ 8.5% on balance at the end of the previous month
	Rs.	Rs.	Rs.
Apr-21	30000	30000	0
May-21	30000	60000	212.50
Jun-21	30000	90000	425.00
Jul-21	30000	120000	637.50
Aug-21	30000	150000	850.00
Sep-21	30000	180000	1062.50
Oct-21	30000	210000	1275.00
Nov-21	30000	240000	1487.50
Dec-21	30000	270000	1700.00
Jan-22	30000	300000	1912.50
Feb-22	30000	330000	2125.00
Mar-22	30000	360000	2337.50
TOTAL	360000		14025.00

 

Note: The calculation of the total EPF balance in the account at the end of the year is the total balance at the end of last month and the total source of interest that has been added. Therefore, the total balance available in the account is:

2,000. 3,60,000 + Rs.14,025 = Rs. 3,74,025

You may also, Like- Prepare at a time 100 Employees Form 16 Part A&B for the F.Y.2020-21 as per new and old tax regime [This Excel Utility can prepare at a time 50 Employees Form 16 Part B as per U/s 115 BAC]

 

12. Calculation of Taxable Interest for 2021-222: -

Taxable interest will have to be calculated at the end of 2021-22

At the end of the year the balance is Rs. 3,74,025 / -

The amount of taxable interest will be

(3,74,025-2,50,000) * 8.5% = Rs.10,542.12

The fiscal year 2022-23

The balance available at the end of 2021-22 is the opening balance for 2022-23.

MMYY	Monthly Contribution (EPF +VPF) Rs.	Cumulative Balance is available at the end of the month Rs.	Interest @ 8.5% on balance at the end of the previous month. Rs.
O/B		374025
Apr-22	34400	408425	2649.34
May-22	34400	442825	2893.01
Jun-22	34400	477225	3136.68
Jul-22	34400	511625	3380.34
Aug-22	34400	546025	3624.01
Sep-22	34400	580425	3867.68
Oct-22	34400	614825	4111.34
Nov-22	34400	649225	4355.01
Dec-22	34400	683625	4598.68
Jan-23	34400	718025	4842.34
Feb-23	34400	752425	5086.01
Mar-23	34400	786825	5329.68
TOTAL	412800		47874.13

 

Calculation of Taxable Interest for 2022-23: -

Taxable interest will have to be calculated towards the end of 2022-23

At the end of the year the balance is Rs. 7,86,825 / -

Less: Opening Balance 3,7474,025 / -

The amount of taxable interest will be

7,86,825 - (3,74,025 + + 2,50,000) * 8.5%

= Rs. 13, 838 / -

 

Note 1: Since the tax has already been deducted in the amount of Rs. 3,60,000 / - in the opening balance in 2021-22, the same amount will be deducted in 2022-23.

 

Note 2: Since contributions above Rs.250,000 will be taxable, the interest amount of Rs.14,025 / - included in the opening balance will not be considered for tax purposes.

 

On May 10, 2021 by www.taxexcel.net

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Look at the major changes to the income tax from April 1, 2021. With Automated Income Tax Revised 

Form 16 Part B for the F.Y.2020-21 

Significant changes in the field of income tax will take effect from 1 April 2021. The new financial year is set to begin on April 1st. Budget 2021 has some major changes for this financial year (2021). In the budget of 2021,

 

Finance Minister Nirmala Sitharaman did not give any exemption to the middle class and salary class in the field of income tax. However, those over the age of 75 were exempted from filing income tax returns this time.

 

It is decided to take action against those who do not file income tax returns. All the changes come from April 1, 2021.

Download and Prepare at a time 50 Employees Form 16 Part B for the F.Y.2020-21 with new and old tax regime U/s 115 BAC 

If a person does not file an income tax return (ITR) from April 1, the interest rate on TDS on bank deposits will be doubled. This means that if a person does not come to the income tax outgo slab and file an ITR, the rate of TDS will be doubled.

 

The income tax changes come into the effect from 1 April 2021

 

        1. Pre-filled ITR Forms A major change to the ITR form is expected as per the 2021 budget (Pre-Filed ITR). PrefieldITR forms will contain information on securities listed, dividend income, bank/post office interest, etc. Previously filed ITR forms were available for salaried employees where income was reflected on the basis of Form 16, but now the scope is wide.

 

 

    2. Interest on PF earned from the provident fund is exempt from income tax. However, the 2021 budget proposes to provide a fund of Rs. 5 lakh taxable.

 

 

      3. Penalty for not linking Aadhaar and PAN from 1st March 2021, the date fixed for connection of Aadhaar and Income PAN. In case of non-linking, your PAN card will be valid. If failed to submit connection may result in a fine of Rs. 10,000 / -. Link PAN with 10,000 Aadhaar as per Section 272 B of the Income Tax Act

 

 

                4. Higher TDS / TCS rates for non-filers of income tax returns (ITR) A new section 206 AB (ITR) has been inserted in the Income Tax Act as a special provision for higher rates for TDS for non-filers of income tax returns.

Download and Prepare at a time 100 Employees Form 16 Part B for the F.Y.2020-21 with new and old tax regime U/s 115 BAC

 

The proposed rate on non-filers is higher than below: twice the rate or 5% more than double the rate prescribed in the relevant provisions of the law, similarly, a new section 206 CCA has been inserted in the Income Tax Act as a special provision for non-filing of income tax returns (ITR). Providing higher rates for TDS for filers The proposed rate for non-filers is higher than the following: 2% to 5% of the rate specified in the relevant provisions of the Act

 

  5. Provide the bills under the LTC cash voucher scheme

 

To avail tax benefits under the LTC Cash Voucher Scheme, ensure that the required bills in the correct format containing the GST amount and the seller's GST number have been submitted to your employer (if the employer is proposing this scheme) on or before March 31, 2021. Employees will have to spend three times the amount considered as LTA rent on goods and services that attract 12% or more GST.

Download and Prepare One by One Form 16 Part B for the F.Y.2020-21 with new and old tax regime U/s 115 BAC

 

No tax filing for senior citizens above 5 years of age, those over 75 years of age and those whose pension income and interest on fixed deposits come to the same bank and who have only interest income, are not required to file an income tax return.

 

The bank will deduct the income tax that he has to pay and the money that he has to pay to the government. The condition is that only the pension income of the person and the interest on the fixed deposit should be deposited in the same bank.

 

Relief of Super Senior Citizens

 

Does the TDS rule apply to senior citizens? From April 1, 2021, senior citizens over the age of 75 will not have to do ITR. This exemption has been granted to senior citizens who are dependent on pension or fixed deposit interest.

On May 09, 2021 by www.taxexcel.net

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