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

Rohan Mehta retires from Sundaram Textiles Ltd. and receives Rs 4,20,000 as accumulated balance from a recognised provident fund. Rule 8 of Part A of the Fourth Schedule does not apply, so the amount is includible in his total income. The trustees of the Employees' Provident Funds Scheme, 1952 pay the amount to him. What tax must be deducted at the time of payment under section 192A?

Tax of Rs 42,000 must be deducted. Section 192A requires 10% deduction on a taxable provident fund accumulated balance, and the payment of Rs 4,20,000 exceeds the Rs 50,000 threshold, so deduction applies on the full amount.

  1. ANil, because the payment is below Rs 5,00,000
  2. BRs 42,000, being 10% of Rs 4,20,000Correct
  3. CRs 12,600, being 3% of Rs 4,20,000
  4. DRs 84,000, being 20% of Rs 4,20,000

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 threshold is Rs 50,000, and Rs 4,20,000 exceeds it. Tax is 10% x 4,20,000 = Rs 42,000. The Nil option wrongly uses a threshold higher than the Rs 50,000 stated.

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