FOURTH SCHEDULE – PART A – RECOGNIZED PROVIDENT FUND
1331. Whether notifications fixing rate of interest issued under rule 6 have only prospective effect
1. Under rule 6(b ) of Part A of the Fourth Schedule interest credited on the balance to the credit of an employee participating in a recognised provident fund is exempt from income-tax, to the extent it does not exceed one-third of the employee’s salary for the relevant year or is not allowed at a rate exceeding that fixed by the Central Government in this behalf by notification in the Official Gazette. Under Notification No. SO 225(E), dated 30-3-1974 [printed here as Annex I] the rate of interest specified in this behalf was increased from 6 per cent to 6.5 per cent with effect from April 1, 1974. Under Notification No. SO 153(E), dated 25-3-1975 [printed here as Annex II] the rate of interest was further increased from 6.5 per cent to 7.5 per cent with immediate effect.
2. The Board are advised that a notification fixing the rate of interest issued under rule 6 of Part A of the Fourth Schedule will have only prospective effect. In this view of the matter, the benefit of exemption from tax in respect of interest credited at the enhanced rates would be available only in respect of amounts credited to the individual account of employees on or after the date on which the relevant notification came into force.
Circular : No. 188 [F. No. 142/(7)/74-TPL], dated 6-1-1976.
ANNEX I – NOTIFICATION NO. SO 225(E), DATED 30-3-1974 REFERRED TO IN CLARIFICATION
In pursuance of clause (b) of rule 6 of Part A of the Fourth Schedule and in supersession of the notification No. 10, dated March 3, 1974 issued under section 58F(2) of the 1922 Act, the Central Government has fixed, with effect from April 1, 1974, 6½ per cent as the rate referred to in the said clause (b).
ANNEX II – NOTIFICATION NO. SO 153(E), DATED 25-3-1975 REFERRED TO IN CLARIFICATION
In pursuance of clause (b) of rule 6 of Part A of the Fourth Schedule to the Income-tax Act, 1961 (43 of 1961), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. SO 225(E), dated March 30, 1974, the Central Government hereby fixes with immediate effect 7½ per cent as the rate referred to in the said clause (b)
REQUIRE CIRCULAR FOR RECTIFICATION UNDER SECTION 154 FOR WRONG ORDER PASSED BY ASSESSING OFFICER BY WRONG ADDITION UNDER SECTION 43B OF INCOME TAX