The Assets Tax Department has fabricated changes in the ITR forms 2 and 3 applicative for FY 2017-18 to ascertain whether the PF abandonment fabricated by you is taxable or not and additionally if your assets for the antecedent years accept to be re-computed on which added tax has to be paid.
Anyone filing their tax acknowledgment now will accept to download the new utilities of these forms and accommodate the appropriate added capacity forth with advantageous a penalty, if applicable.
Contribution fabricated to PF has four apparatus – Employee’s contribution, Employer’s Accession and Absorption on both Employer and Employee’s contribution. Out of these four, three apparatus – employer’s contribution, absorption becoming on your and employer’s accession — will be taxable beneath altered active of the Assets Tax Act.
Chartered Accountant, Naveen Wadhwa, DGM, Taxmann.com says, “According to the assets tax laws, abandonment from PF afore the achievement of bristles years of annual is taxable in the easily of the assessee irrespective whether PF is accumulated from one employer or added than one employer.”
The taxation of employee’s contribution, i.e., your accession afore the achievement of bristles years of connected annual will depend on whether you accept claimed the answer beneath area 80C or not in the antecedent years while filing your ITR.
Case 1: If you accept not claimed answer beneath area 80C “While filing your ITR in the antecedent years, if you accept not claimed the answer accessible beneath area 80C with annual to the accession fabricated by you to PF, again that bulk will not be taxable in your easily at the time of abandonment from PF. Alone the accession fabricated by your employer and absorption becoming on both the contributions (i.e., agent and employer) will be taxable in your easily in the year of withdrawal. However, the tax bulk would depend on your applicative assets slab in the year in which PF contributions were made,” adds Wadhwa.
Confirming the angle Chetan Chandak, Head of Tax Research, H&R Block India says, “The abandonment of PF will be burdened in the year of withdrawal, however, tax ante will be applicative for the banking year in which absolute PF contributions were made.”
Case 2: If you accept claimed answer beneath area 80C On the added hand, if you accept claimed answer on your (i.e., employee’s) accession fabricated to PF beneath area 80C in the antecedent years, again the abandonment bulk in annual of employee’s contribution, to the admeasurement of Area 80C answer claimed earlier, will be taxable in your easily forth with the employer’s accession and the absorption earned. Here additionally the bulk applicative to you will depend on the applicative assets slab in the year in which PF contributions were made, explains Wadhwa.
Sachin Vasudeva, a practising Chartered Accountant says, “According to area 111 and Rule 9, sub-rule 1 of agenda IV of the Assets Tax-Act, in case of abandonment of PF afore the achievement of connected bristles years of annual or the added altitude defined in Rule 8 of Agenda IV of the Assets tax Act, the bulk of tax would be computed for anniversary of the banking years and the tax bulk would be applicative for those corresponding years in the year in which PF contributions were fabricated and not the tax bulk of the year in which abandonment was made. All the four apparatus of PF will become taxable in the year of withdrawal.”
The tax to be paid in both the cases can be explained through the examples below.
Mr. X fabricated the afterward contributions to PF and earns absorption on it. His employer additionally contributes the according amount. The taxable assets and tax paid in aloft years are as follows:- He withdrew the absolute accumulated antithesis of PF in FY 2017-18, i.e., afore connected annual of 5 years. His tax-treatment will be as follows: On the added hand, if Mr. X had not claimed the answer beneath area 80C, his tax accountability would be on the lower side. (Tax accountability taken in all cases after the cess) (Source: Taxmann.com) (All abstracts are in Rs)
Wadhwa says, “If your accepted assets tax accountability is aught as your absolute assets is beneath the basal absolution limit, again additionally you will be accountable to pay tax. This tax accountability is for the antecedent banking years in which you adored tax by accidental to the provident fund.”
Chandak additionally adds, “On the abandonment from PF afore the achievement of connected of bristles years of service, all the antecedent years’ (years back the PF contributions were made) incomes accept to re-computed on which added tax has to be paid, alike if your accepted assets tax accountability is zero. However, an assessee can affirmation the abatement beneath area 89(1) if applicative to his case.”
Why there was the charge to alter the ITR forms “Though as per income-tax Act, tax is appropriate to be computed year-wise in case of abortive abandonment from PF. But, there was no advantage in income-tax acknowledgment (ITR) to accommodate year-wise capacity in annual of accession fabricated to PF and cogwheel bulk of tax to be paid at the time of pre-mature withdrawal. In adjustment to abode this issue, the CBDT has revised ITR-2 and 3 and now an assessee can address year astute capacity in ITR,” explains Wadhwa.
In accession to that, column the accomplishment of borderline of filing ITR on August 31, 2018, the excel and java utilities of ITR forms were due for afterlight in adjustment to accredit the adding of absorption beneath area 234A in accession to that beneath sections, 234B and 234C, if any, as able-bodied as backward filing fees applicative from this appraisal year onwards.
The afterlight in the ITR forms on September 1, 2018 is the third revisions back August in excel and java architecture of the ITR anatomy utilities. Previously the ITR anatomy utilities were revised on August 1, 2018 column the addendum of borderline of ITR filing by one month. Again these utilities were revised on August 9, 2018 which asked for abundant alienation of absorption assets becoming from accumulation account, anchored deposits and absorption becoming from assets tax refund.
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