Skip to content

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

Rohit Menon, an employee of Kaveri Textiles Ltd, ceases employment and the trustees of the Employees' Provident Funds Scheme, 1952 pay him an accumulated balance of Rs 4,80,000 from a recognised provident fund. Owing to the non-fulfilment of the service condition, the exemption in rule 8 of Part A of the Fourth Schedule is not applicable, so the balance is includible in his total income. Applying section 192A, how much tax is to be deducted at the time of payment?

Tax of Rs 48,000 must be deducted. Section 192A requires the trustees to deduct tax at ten per cent when an accumulated provident fund balance is taxable because rule 8 does not apply. The payment of Rs 4,80,000 exceeds the Rs 50,000 threshold, so 10% of it applies.

  1. ARs 48,000Correct
  2. BRs 24,000
  3. CRs 4,800
  4. DNil, because deduction applies only if the payment exceeds Rs 5,00,000

Explanation

Section 192A requires deduction at 10% on the accumulated balance where it is includible in total income because rule 8 of Part A of the Fourth Schedule does not apply. The proviso exempts only payments below Rs 50,000. Here Rs 4,80,000 is above that limit, so tax is 10% x 4,80,000 = Rs 48,000. Rs 24,000 wrongly uses 5%, and Rs 4,800 uses 1%.

Did you get it right without looking?

One question tells you little. A timed set on Miscellaneous Provisions shows your real accuracy, how long you take and where you lose marks.

Practise Miscellaneous ProvisionsFree diagnostic mock

More Miscellaneous Provisions questions