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CS Executive · Tax Laws and Practice · Income under the Head Salary

Under section 392 of the Income-tax Act, 2025, the Employees' Provident Funds Scheme, 1952 trustees pay an accumulated balance to an employee of a recognised provident fund, and the balance is includible in total income because paragraph 8 of Part A of Schedule XI does not apply. At what rate, and above what threshold, is tax deducted?

Tax is deducted at 10% where the aggregate payment is Rs. 50,000 or more. Section 392(7) applies this to accumulated balances of a recognised provident fund that are includible in total income because paragraph 8 of Part A of Schedule XI does not apply.

  1. A10% where the aggregate payment is Rs. 50,000 or moreCorrect
  2. B10% where the aggregate payment exceeds Rs. 1,00,000
  3. C20% where the aggregate payment is Rs. 50,000 or more
  4. DAverage rate of tax on estimated salary, irrespective of the amount

Explanation

Section 392(7) requires deduction at 10% at the time of payment where the aggregate amount of payment is Rs. 50,000 or more and the balance is includible in total income. The average-rate method of section 392(1) applies to ordinary salary, not to this specific case.

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