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
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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.”
