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

Shreya, an employee of Kaveri Textiles Ltd, participates in a recognised provident fund. On her resignation, the trustees of the Employees' Provident Funds Scheme, 1952 pay her an accumulated balance of Rs 3,20,000. Because her service was short, rule 8 of Part A of the Fourth Schedule is not applicable, so the balance is includible in her total income. What tax must be deducted at the time of payment under section 192A?

Rs 32,000 must be deducted. Section 192A requires TDS at ten per cent on an accumulated provident fund balance that is taxable because rule 8 of Part A of the Fourth Schedule does not apply, and the payment exceeds Rs 50,000.

  1. ARs 16,000 at 5%
  2. BRs 32,000 at 10%Correct
  3. CRs 64,000 at 20%
  4. DNil, since the payment is from a recognised fund

Explanation

Section 192A requires deduction at ten per cent where the accumulated balance is includible in total income because rule 8 of Part A of the Fourth Schedule is not applicable. The payment of Rs 3,20,000 exceeds the Rs 50,000 threshold. Tax is 10% x 3,20,000 = Rs 32,000. Nil deduction is wrong because the exemption is lost in this case.

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