Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

October 2008

Exemption : S. 10(11) : Interest income accrued in provident fund account of employees after retirement : Continue to qualify for exemption u/s.10(11).

By K. B. Bhujle, Advocate
Reading Time 2 mins

New Page 2

4 Exemption : S. 10(11) of Income-tax Act, 1961 : A.Ys. 2001-02 to 2004-05 : Interest income accrued in the provident fund account of employees after retirement : Would continue to qualify for exemption u/s.10(11).

[Subhash Bansal v. ITO, 170 Taxman 601(P&H)

The petitioner was a senior citizen and an employee and a retired employee of the Punjab State Electricity Board. In this case, in the writ petition filed by the petitioner, the question before the Punjab and Haryana High Court was as to whether interest income, that had accrued on the credit balance in the provident fund governed by the Provident Fund Act, 1925 after the retirement, would continue to qualify for exemption from income-tax.

 

The High Court held as under :

“(i) A perusal of S. 10(11) would show that any payment received by an assessee from a provident fund, to which the 1925 Act applies, would not constitute a part of total income. In other words, it would, thus, qualify for exemption from income-tax. It is, thus, obvious that since payment of interest is received by the assessee-employee from provident fund, it would also qualify for exemption from income-tax, provided the provisions of 1925 Act apply.

(ii) The reply given by the CBDT in its letter dated 15-6-2006 clarified the issue that interest on GPF is exempt from income-tax as per the provisions of S. 10(11) and no TDS is required to be deducted from the payment of interest on GPF after the date of retirement of an employee.

(iii) The petition succeeded and the Revenue was to be directed to extend the benefit of exemption from income-tax to the interest income that had accrued to the employees of the Board on the credit balance which had been retained by them by exercising option in their provident fund account after their retirement in terms of Regulation 38.”

 

You May Also Like