Taxable interest on PF deposit

Does the pf interest will be calculated based on some compound interest + with previous Amt stored , how to calculate for 2.5 and 5 lakh interest part is it on FY only, this pf will be withdrawn only after retirement

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Hi,

CBDT has suggested the below formula to calculate the Perquisite amount. Also, attaching the notification for easy reference.

TP= (PC/2)*R + (PC1+ TP1)*R

Where,
TP= Taxable perquisite under sub-clause (viia) of clause (2) of section 17 of the Act for the current previous
year;

TP1 = Aggregate of taxable perquisite under sub-clause (viia) of clause (2) of section 17 of the Act for the
previous year or years commencing on or after 1st day April, 2020 other than the current previous year (See Note);

PC= Amount or aggregate of amounts of principal contribution made by the employer in excess of Rs. 7.5
lakh to the specified fund or scheme during the previous year;

PC1 = Amount or aggregate of amounts of principal contribution made by the employer in excess of Rs. 7.5
lakh to the specified fund or scheme for the previous year or years commencing on or after 1st day April, 2020 other
than the current previous year (See Note);

R= I/ Favg ;

I=Amount or aggregate of amounts of income accrued during the current previous year in the specified fund
or scheme account;

Favg = (Amount or aggregate of amounts of balance to the credit of the specified fund or scheme on the first
day of the current previous Year + Amount or aggregate of amounts of balance to the credit of the specified fund or
scheme on the last day of the current previous year)/2.

Explanation. — For the purposes of this rule, “specified fund or scheme” shall mean a fund or scheme
referred to in sub-clause (vii) of clause (2) of section 17 of the Act.
Note: Where the amount or aggregate of amounts of TP1 and PC1 exceeds the amount or aggregate of amounts of
balance to the credit of the specified fund or scheme on the first day of the current previous year, then the
amount in excess of the amount or aggregate of amounts of the said balance shall be ignored for the purpose of
computing the amount or aggregate of amounts of TP1 and PC1.”.

notification_no_11_2021.pdf (516.3 KB)

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