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Dear Professional Seniors & Friends.
Warm Greetings!
As the top tax consultant in Gurgaon, here we have the Next post of #MCQ on concept based practical professional knowledge on taxability on withdrawal from provident fund account in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.
MCQ 63,1: On 25th March 2017, Mr. X withdraw his money of Rs 5.00.000 from Provident fund on the retirement from company ABC in which he was working with last 4 years. During FY 2013-14 10 2016-17, he has claimed deduction under Section 80C of Rs 2.50,000 in total for 4
years). The break up of amount he received is as follows-
Employer's contribution-2,40,000
Employee's contribution -2.20.000
Interest on Employers contribution-25,000
Interest on Employee's contribution-15.000
Which among the following is correct in terms of taxability under Income Tax Act assuming the withdrawal is from recgonized provident fund?
A) Total money received will be taxable
B) Apart from employees contributions all the receipts will be taxable, and deductions claimed earlier in form of employees contributions shall now be withdrawn
C) Interest of both components shall only be taxable.
D) Nothing will be Taxable.
MCQ 63.2: What if in the above question, Mr. X has transferred the balance in Provident Fund account to new employer and worked in new company for 2 years and then withdraw the money?
A) Total money received will be taxable.
B) Apart from employees contributions, all the receipts will be taxable, and deductions claimed earlier in form of employees contributions shall now be withdrawn.
C) Interest of both components shall only be taxable.
D) Nothing will be taxable.
This post of MCQ is on provisions relating to various interest applicable under different provisions on late payment of income tax.
Answer to MCQ 63.1: B) Apart from employees contributions, all the receipts will be taxable, and deductions claimed earlier in form of employees contributions shall now be withdrawn.
Answer to MCQ 63.2: D) Nothing will be taxable.
1. Section 10(11) and 10(12) of the Act deal with exemption on payments from provident funds which provides as follows-
2. Nothing is taxable subject to following conditions-
A) Employee left the job after five years of service
B) Where period of service is less than 5 years, the termination is due to health, discontinuance of business of employer
C) On re-employment, the balance in R.P.F is transferred to R.P.F with new employer. In case of employment with different employers, if the PF balance maintained with the old employer is transferred to the PF account of the new employer, it is considered a continuous employment.
D) If the balance is transferred to account under pension scheme referred to in Section 80CCD.
3. If none of the above conditions are satisfied then:
A) The amount not taxed earlier shall be taxed in the same manner as URPF i.e.
Employer's contribution and interest thereon - Taxable as Salary income Employee's contribution-Not Taxable
Interest on employee's contribution - Taxable as income from other sources
B) Any tax concession (Sec 80C) availed by assessee earlier for contribution to RPF(employee contribution) shall now be withdrawn.
Based on the above analysis, correct answer MCQ 63.1: B) Apart from employees contributions, all the receipts will be taxable, and deductions claimed earlier in form of employees contributions shall now be withdrawn and Correct answer MCQ 63.2: D) Nothing will be taxable since assessee transferred his old PF account to new employer.
(Disclaimer: The objective of the MCQ post is just to discuss the concept. It may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)
Sincere Regards!
CA Sanjay Kumar Agrawal
Mobile: 9810116321
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