Calculation of Taxable and Non-Taxable Interest Under EPF/GPF | Income Tax (25th Amendment) Rules, 2021
The Government has changed the rules for calculation of interest on EPF/GPF/RPF Accounts and has set threshold limit for contribution in EPF Rs. 2.50 Lakhs and GPF Rs. 5.00 Lakhs on which interest received will not be taxable. Any interest on contribution made during the FY 2021-22 in excess of amount of Rs. 2.50 Lakhs (EPF) and Rs. 5.00 Lakhs (GPF) will be taxable as “Income from Other Sources “in the hand of employee or person contributing to those funds.
CBDT Notification No. 95/2021, dated 31-08-2021, has notified the method of calculation of interest and maintenance of two separate accounts in the EPF /GPF as Taxable Account and Non-Taxable Account.
The Finance Act, 2021 has amended Section 10(11) and Section 10(12) to provide that exemption shall not be available for the interest income accrued during the previous year on the recognised and statutory provident fund in the account of the person to the extent it relates to the contribution made by the employees in excess of Rs. 2,50,000 in the previous year.
However, if such person has contributed to a fund in which there is no contribution by the employer, a limit of Rs. 2,50,000 shall be increased to Rs. 5,00,000 (GPF). The amount of such interest income shall be computed as per the prescribed rules.
The CBDT has notified Rule 9D to calculate the taxable portion of interest pertaining to the contribution made to a statutory or a recognized provident fund in excess of the threshold limit of Rs. 2.5 lakh or 5.0 lakhs as the case may be. It provides that separate accounts within the provident fund account shall be maintained during the previous year 2021-22 and onwards for the taxable and non-taxable contribution made by the person.
As per Rule 9D, for the purpose of tax calculation, separate accounts shall be maintained within the Provident Fund account from FY 2021-22 and onwards for the taxable and non-taxable contribution by an individual employee.
The same is tabulated below:
| Taxable contribution account | Non-taxable contribution account |
| i) Employee contributions made during the FY from FY 2021-22 onwards in excess of the threshold limits of 2.50 Lakhs or 5.00 Lakhs (as the case may be)
ii) Add: Interest accrued thereon iii) Less: Any withdrawal from the account |
i) Closing balance as on 31 March 2021
ii) Add: Employee contributions from FY 2021-22 onwards which is not included in the taxable contribution account iii) Add: Interest accrued thereon iv) Less: Any withdrawal from the account |
PLEASE NOTE THAT: only the interest accrued in Taxable contribution account would be taxable in the hands of the employee under the income head ‘Income from Other Sources’. The interest accrued in Non-taxable contribution account shall continue to be tax exempt.
LET’S UNDERSTAND WITH AN EXAMPLES; Mr. Aman is contributing Rs. 55,000/- per month in his GPF Account.
The Calculation of Non-Taxable and Taxable Interest are as follows;
| CALCULATION OF NON-TAXABLE & TAXABLE INTERESTS (GPF) THRESHOLD LIMIT Rs. 5.00 L | |||||
| Paid in the Month of | Monthly Contribution | Cumulative Balance at the end of month | Interest @7.1% p.a. on balance at the end of month | Non-Taxable Interest | Taxable Interest |
| Apr-21 | 55,000 | 55,000 | 325 | 325 | |
| May-21 | 55,000 | 1,10,000 | 651 | 651 | |
| Jun-21 | 55,000 | 1,65,000 | 976 | 976 | |
| Jul-21 | 55,000 | 2,20,000 | 1,302 | 1,302 | |
| Aug-21 | 55,000 | 2,75,000 | 1,627 | 1,627 | |
| Sep-21 | 55,000 | 3,30,000 | 1,953 | 1,953 | |
| Oct-21 | 55,000 | 3,85,000 | 2,278 | 2,278 | |
| Nov-21 | 55,000 | 4,40,000 | 2,603 | 2,603 | |
| Dec-21 | 55,000 | 4,95,000 | 2,929 | 2,929 | |
| Jan-22 | 5,00,000 | 2,958 | 2,958 | ||
| 55,000 | 5,50,000 | 296 | 296 | ||
| Feb-22 | 55,000 | 6,05,000 | 3,580 | 2,958 | 621 |
| Mar-22 | 55,000 | 6,60,000 | 3,905 | 2,958 | 947 |
| TOTAL | 6,60,000 | 25,383 | 23,519 | 1,864 | |
- The rate of interest in FY 2020-21 is considered @7.1% p.a.
ACCOUNTS TO BE MAINTAINED IN EPF/GPF BY THE CONCERNED DEPARTMENT
| NON-TAXABLE CONTRIBUTION ACCOUNT AND TAXABLE CONTRIBUTION ACCOUNT | ||||
| Sr. No. | Particulars for FY 2021-22 | Non-Taxable Amount (Rs.) | Taxable Amount (Rs.) | Total Amount (Rs.) |
| 1 | Opening Balance as on 01/04/2021 | 30,00,000 | 30,00,000 | |
| 2 | Interest Accrued on Opening Balance | 2,13,000 | 2,13,000 | |
| 3 | Contribution made up to threshold limit /excess of limited in FY 2021-22 | 5,00,000 | 1,60,000 | 6,60,000 |
| 4 | Interest Accrued on the amount within threshold/ above threshold limit | 23,519 | 1,864 | 25,383 |
| 5 | Closing Balance as on 31/03/2022. | 37,36,519 | 1,61,864 | 38,98,383 |
- The accumulated balance in GPF Account of Mr. Aman is considered of Rs. 30.00 Lakhs as on 31/03/2021.
- The Rate of Interest in GPF Account for FY 2021-22 is considered @7.1% p.a.
- The excess contribution made by Mr. Aman during FY 2021-22 was of Rs. 160000/- and interest thereof of Rs. 1,864 will be taxable in his hand in the head “Income from other sources”.
LET’S CONSIDER SAME EXAMPLE FOR EPF ACCOUNT IN THIS CASE THRESHOLD LIMIT IS RS. 2.50 LAKHS
| CALCULATION OF NON-TAXABLE & TAXABLE INTERESTS (EPF) | ||||||
| Paid in the Month of | Monthly Contribution | Cumulative Balance at the end of month | Excess Amount /Amount over threshold Limited | Interest @7.1% p.a. on balance at the end of month | Non-Taxable Interest | Taxable Interest |
| Apr-21 | 55,000 | 55,000 | 325 | 325 | ||
| May-21 | 55,000 | 1,10,000 | 651 | 651 | ||
| Jun-21 | 55,000 | 1,65,000 | 976 | 976 | ||
| Jul-21 | 55,000 | 2,20,000 | 1,302 | 1,302 | ||
| Aug-21 | 2,50,000 | 1,479 | 1,479 | |||
| 55,000 | 2,75,000 | 25,000 | 148 | 148 | ||
| Sep-21 | 55,000 | 3,30,000 | 80,000 | 1,953 | 1,479 | 473 |
| Oct-21 | 55,000 | 3,85,000 | 1,35,000 | 2,278 | 1,479 | 799 |
| Nov-21 | 55,000 | 4,40,000 | 1,90,000 | 2,603 | 1,479 | 1,124 |
| Dec-21 | 55,000 | 4,95,000 | 2,45,000 | 2,929 | 1,479 | 1,450 |
| Jan-22 | 55,000 | 5,50,000 | 3,00,000 | 3,254 | 1,479 | 1,775 |
| Feb-22 | 55,000 | 6,05,000 | 3,55,000 | 3,580 | 1,479 | 2,100 |
| Mar-22 | 55,000 | 6,60,000 | 4,10,000 | 3,905 | 1,479 | 2,426 |
| TOTAL | 6,60,000 | 410000 | 25,383 | 15,088 | 10,295 | |
| NON-TAXABLE CONTRIBUTION ACCOUNT AND TAXABLE CONTRIBUTION ACCOUNT | ||||
| Sr. No. | Particulars for FY 2021-22 | Non-Taxable Amount (Rs.) | Taxable Amount (Rs.) | Total Amount (Rs.) |
| 1 | Opening Balance as on 01/04/2021 | 30,00,000 | 30,00,000 | |
| 2 | Interest Accrued on Opening Balance | 2,13,000 | 2,13,000 | |
| 3 | Contribution made up to threshold limit /excess of limited in FY 2021-22 | 2,50,000 | 4,10,000 | 6,60,000 |
| 4 | Interest Accrued on the amount within threshold/ above threshold limit | 15,088 | 10,295 | 25,383 |
| 5 | Closing Balance as on 31/03/2022. | 34,78,088 | 4,20,295 | 38,98,383 |
- The accumulated balance in GPF Account of Mr. Aman is considered of Rs. 30.00 Lakhs as on 31/03/2021.
- The Rate of Interest in EPF Account for FY 2021-22 is considered @7.1% p.a.
- The excess contribution made by Mr. Aman during FY 2021-22 was of Rs. 4,10,000/- and interest thereof of Rs. 10,295/- will be taxable in his hand in the head “Income from other sources”.
Author Bio
Sir, I have deposited 6 lac and withdrawn Rs. 10 lac from my GPF account. in the same FY. Is the interest earned on the amount which is more than 5 lac and comes to 1 lac taxable? Here amount of withdrawal is more than the deposited amount in the same FY
sir
my GPF closing balance on 31st march 2023 was around Non taxable 5000000/ and Taxable 400000/ . I have withdraw 500000/ . Then it should be withdrawn from taxable balance first and remaining amount from non taxable. But in my lager statement it was withdrawn from non Taxable only.
Sir, suppose there is any retired employee who has retained the GPF amount with his employer and has not made any contribution to GPF during FY 2022-23. He gets interest of Rs 5.50 lacs on the retained GPF for FY 2022-23. Is the interest so received is taxable?. If yes, how much?
I had deposited in 10 lakh in gpf a/c in 2022-23 and withdrawl 8 lakh in March 23 then what is income from intrest shown in 22-23
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sir, is interest on GPF for the amount in excess of 5laks is to be added by DDO are to be shown by me at the time of ITR filling.
1. sir, withdrawal during year is also put under taxable and Non taxable , as column provided , not understood.
please guide.
2. Is any pay arrears or D.A arrears should be treated as deposit in G.P.F and to come threshold for amount exceeding limit of 5 lacks.
3. As summary column provided for taxable & Non taxable for O.B , , please tell that how or which portion would be placed in taxable OB.
whether we can withdraw GPF amt from taxable amt only,?
Sir Kindly clarify whether GPF Loan recovery (Mandatory) against contribution made prior to FY21 is to considered for taxable interest. Example GPF Loan recovery of Rs 10 lakhs in FY 21-22 (against GPF contribution prior to FY 21) . Whether afore said is to be included in taxable component ?
Dear sir
Please note that the amount of loan will reduce your balance in GPF account. Suppose you have balance of Rs 25.00 Lakhs on 31/03/2021 and you have take. Loan of Rs 5.00 Lakhs on 01/04/2021 then the interst will be payable on your balance Rs 25-5 =20 Lakhs from 1 April 2021 onward plus amount of contribution and refund of loan taken.
Suppose your contribution is Rs 15000 and loan refund is of Rs 50000/-pm then interest will be payable on Rs ( 2000000+ 15000+ 50000) for month of May onwards.
Regards
Closing balance is Rs.37,36,519 as on 31.03.2022. What will happen in the next financial year i.e., 2022-23. Wiil the closing balance is taken as opening balance and the excess contribution and interest accrued on it during last financial year will have no bearing. Likewise does the taxable interest is calculated again for the financial year 2022-23. Please clarify it.
Dear Sir
Please note that there shall be two accounts one taxable and one not taxable as mentioned in article. Form FY 2022-23 you will get interest in both accounts but interest in taxable account will be added to your income as IFOS and interest in non taxable account will exempt .
Regards
Plz provide few examples with withdrawal, advances and arrear cases