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CA Final · Direct Tax Laws & International Taxation · Miscellaneous Provisions

Mr. Raman retires from Sundaram Textiles Ltd. and receives the accumulated balance of Rs 4,00,000 from a recognised provident fund. Because the conditions in rule 8 of Part A of the Fourth Schedule are not met, the balance is includible in his total income. The trustees of the Employees' Provident Funds Scheme, 1952 make the payment. What tax must be deducted at the time of payment under section 192A?

Tax of Rs 40,000 must be deducted. Section 192A requires a 10% deduction on an accumulated provident fund balance that is includible in total income, and the Rs 4,00,000 payment is above the Rs 50,000 threshold, so 10% of Rs 4,00,000 applies.

  1. ARs 20,000
  2. BRs 40,000Correct
  3. CRs 4,000
  4. DNo deduction, as the payment is from a provident fund

Explanation

Section 192A requires deduction at 10% where the accumulated balance is includible in total income because rule 8 of Part A of the Fourth Schedule does not apply. The payment of Rs 4,00,000 exceeds the Rs 50,000 threshold, so 10% of Rs 4,00,000 = Rs 40,000. Rs 20,000 wrongly uses 5%, and no deduction is wrong because the threshold is crossed.

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