In the context of a person employed in a private company, both employer and employee contribute to EPF under EPFO. Two questions in relation to how EPF Interest on employee contributions exceeding 2.5L has to be shown (said person has not made any withdrawls and continues to be employed with the same employer - so this is just accruing in his EPF account):
- Does this need to be shown every year in the ITR (as opposed to only at the time of withdrawl/transfer/termination)
- In the ITR, Income from Other Sources has several options for showing this interest, which section should this be shown in Section 10(11) or 10(12). I believe it should 10(12) Privsio 1 is this correct?
@Sam1 Does your form 16 include the contribution made by your employer in EPF/EPS? If yes, under which section do you claim a deduction for it?
@S_Gupta The only entry I see in the form 16 for provident fund is in 80C. I suppose this is for employee contribution. But I know the employer also contributes as it is in the EPF passbook.
Assuming you and your employer both contribute to the EPF. And assuming you (employee) contribute more than 2.50 Lakhs in a previous year, then the interest component on the amount exceeding 2.50 Lakhs will be taxable u/s 10(11) first proviso.
From the next year onwards, on this excess amount over 2.50Lakhs and the interest thereon will become principal for next year. and this corpus will generate interest every year. Then this interest will be taxable u/s 10(12) first proviso.
See the video for a great example: PF Taxability, Income Tax on Provident fund, EPF Taxability, EPF tax, EPF new rules, Provident fund - YouTube
Hope, I have answered your query.
Yes, that contribution is by employee only.
But, where do we report this income in ITR? How is this that the extra contribution is not shown anywhere and no section is available for claiming a deduction for it?
Yes I had seen that video before I posted. My impression is that video is wrong. If you see the comments there are people saying the same. There are multiple similar videos in youtube. I don’t think any of them are reliable. Are you a CA?
I’m no CA, but to the best of my knowledge you don’t need to claim a deduction for it - a deduction is only if it is first included in your total income. In this case I don’t think it is. So there is no tax incident on it for you to claim a deduction on it. However please note, if your case is where you exceed the 7.5L threshold (employer contribution to EPF + NPS + Super Annuation), then the situation changes.
@S_Gupta A kind request: If you intend to continue on this employer contribution part, can you please create a separate thread for it, so that this one doesn’t get hi-jacked. I just want this thread to be about interest on employee contribution on section 10(11) and 10(12)
Which is the correct way?
I’m attaching an EPF Passbook, that may be easier to read and answer.
What should be the deductions under section 80C?
Rs. 72,000 or Rs. 71,700?
The difference is very little. But, I want to know the correct accounting methodology. Thanks @Shrutika_Shah
PS (My old query below, before I made the above table!):
While calculating deductions (employee contribution to EPF) under 80C, should we calculate the employee contributions for the salary months of Mar2022 to Feb2023 i.e. EPFO passbook from 01-Apr-2022 to 31-Mar-2023? as the contribution for Mar2022 will be credited in Apr2022 in the EPFO passbook?
should we calculate the employee contributions for the salary months of Apr2022 to Mar2023 i.e. EPFO passbook from 01-May-2022 to 30-Apr-2023? as the contribution for March2023 will be credited in Apr2023 in the EPFO passbook?
Here are the answers to your questions.
- You have to show interest every year under IFOS.
- This has to be entered under Proviso to 10(12).
Deduction u/s 80C is for employee contribution which in your case is ₹72,000.
You can calculate the contribution from April 2022 till March 2023.
Request clarity on interest earned on PF, while not in employment; understand, per IT provisions, interest earned, while not in job, is taxable.
However, interest for a particular FY credited either at the end of calendar year or even later during the next FY e.g. taxable interest earned during FY 2022-23 will be known only by Dec 2023 or later. Few questions:
Does a person expected to include taxable PF interest in the earnings? if yes, how to manage under this situation, when earned taxable interest is not known by the due date for filing ITR?
Kindly clarify, considering following cases: two persons, both leave job in Aug 2022, while one gets job back in Oct 2022, other manages an employment only by Nov 2023. Assuming PF applicable in both employment.
Thanks for the reply. Some follow up question
- Under which Provisio of 10(12)? I suppose it is Provisio 1?
- Usually, the interest paid for the FY is not available yet past the due date for filing. So do we file the prior FY interest instead of the FY for which the AY is being done. Kind of like taking it as interest for prior FY is paid out in this FY, so showing that. (For Example: FY23 interest is not yet updated in the passbook. FY22 interest is updated. So we show FY22 in FY23 and FY23 in FY24 and so forth?). If we are supposed to show FY23 itself, then we’ll have to compute the interest and offer that, but later when EPFO updates the passbook with the interest, it may be different from what we offered.
Hi @Sam1 @Ajay12
Please Ask an Expert for any further guidance.