{"id":2520,"date":"2021-02-20T09:45:09","date_gmt":"2021-02-20T09:45:09","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2520"},"modified":"2021-02-20T10:42:41","modified_gmt":"2021-02-20T10:42:41","slug":"taxability-of-interest-received-on-public-provident-fund","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/","title":{"rendered":"Taxability of Interest Received on Public Provident Fund: A Guide"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Budget 2021,\nannounced by our Union Finance Minister, Ms. Nirmala Sitharaman, has declared\nto levy income tax on the amount earned as interest by an employee or an\nassessee if the same is in excess of Rs 2.5 lakhs in a financial year. In this\nblog, we will talk about the taxability of Interest Received on Public\nProvident Fund.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3abbb79b69a\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3abbb79b69a\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Concept_of_Public_Provident_Fund\" title=\"Concept of Public Provident Fund\">Concept of Public Provident Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Legal_Framework_of_Public_Provident_Fund\" title=\"Legal Framework of Public Provident Fund\">Legal Framework of Public Provident Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Things_to_Remember_for_Public_Provident_Fund\" title=\"Things to Remember for Public Provident Fund\">Things to Remember for Public Provident Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Concept_of_Taxability_of_Interest_Received_on_Public_Provident_Fund\" title=\"Concept of Taxability of Interest Received on Public Provident Fund\">Concept of Taxability of Interest Received on Public Provident Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Amendments_Introduced_through_Budget_2021\" title=\"Amendments Introduced through Budget 2021\">Amendments Introduced through Budget 2021<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/taxability-of-interest-received-on-public-provident-fund\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Public_Provident_Fund\"><\/span>Concept of Public Provident Fund<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term <a href=\"https:\/\/en.wikipedia.org\/wiki\/Public_Provident_Fund_(India)\">PPF<\/a> or\nPublic Provident Fund means a long term investment option that offers both\nattractive returns and rate of interest on the amount invested. Earlier, the\ninterest earned on the said investment was not taxable under Income Tax. But\nthe same has been made taxable if the interest earned is above Rs 2.5 lakhs.<\/p>\n\n\n\n<p>Further, for the purpose of Public Provident Fund, the applicant needs to open an PPF Account with the bank.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/implications-of-union-budget-2021-on-income-tax\/\">Implications of Union Budget 2021 on Income Tax<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Legal_Framework_of_Public_Provident_Fund\"><\/span>Legal Framework of Public Provident Fund<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Central\nGovernment had introduced the concept of Public Provident Fund under the Public\nProvident Fund Act 1968. However, later on, the PPF Act 1968 was repealed by\nthe government and PPF was merged with the Government Savings Bank Act 1873.\nBoth the acts come under the ambit of the Government Savings Promotion Act.<\/p>\n\n\n\n<p>Also, it shall\nbe pertinent to mention that at present, PPFs are regulated and administered by\nthe provisions of the Public Provident Fund Scheme 2019.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_Remember_for_Public_Provident_Fund\"><\/span>Things to Remember for Public Provident Fund<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The things to\nremember for Public Provident Fund are as follows:<\/p>\n\n\n\n<ul><li>According to the provisions of Sub Rule (2) of Rule 3\nof the PPF Scheme 2019, a person can get an PPF account opened on behalf of\nanother person, minor, or an unsound mind person (for whom he\/ she is the\nguardian);<\/li><li>Two or more persons cannot open a Joint Public Provident\nFund Account;<\/li><li>The minimum balance of the account should be Rs 500;<\/li><li>A person can make a maximum investment of Rs 150000 in\na year;<\/li><li>7.9% rate of interest is fixed by the scheme for the amount\ndeposited in the Public Provident Fund Account, whether in a lump sum or in\ninstalments;<\/li><li>A subscriber or the investor has the right to withdraw\nthe funds deposited after the expiry of the five years, starting from the date\nof opening the account;<\/li><li>The premature closing of accounts is allowed under\nRule 13 in the cases as follows:<\/li><\/ul>\n\n\n\n<ol><li>Life threatening\ndisease;<\/li><li>Change in\nresidential status;<\/li><li>Higher\neducation;<\/li><\/ol>\n\n\n\n<ul><li>One of the highlighting features of the PPF scheme is\nthat the credit earned on the account is not qualified to be attached under any\norder or decree of the court under Rule 15;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Taxability_of_Interest_Received_on_Public_Provident_Fund\"><\/span>Concept of Taxability of Interest Received on Public Provident Fund<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The deposit made under the Public Provident Fund\nScheme 2019 can be claimed as an exemption under the provisions of section 80 C\nof the Income Tax Act 1961. Further, such a contribution to the PPF scheme is\nregulated by section 2 (11) of the Income Tax Act. <\/p>\n\n\n\n<p>Also, based on section 10 (11), an amount concerning\nto contribution made in the provident fund formed by the central government is\nexempted. <\/p>\n\n\n\n<p>Moreover, under the provisions of section 80 C, the\nconcept of Public Provident Fund comes under the category of EEE (Exempt \u2013\nExempt \u2013 Exempt) category, which means the interest, withdrawal and\ncontribution on the amount are exempted from tax liability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amendments_Introduced_through_Budget_2021\"><\/span>Amendments Introduced through Budget 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>By way of the\nBudget for the Financial Year 2021 to 2022, the government has proposed to\ncharge tax on the interest received on the contributions made to the provident\nfund if the same is in excess of Rs 2.5 lakhs. <\/p>\n\n\n\n<p>However, based\non the viewpoint expressed by professionals, the interest received on the\namount invested in the PPF account will still be tax free as there is a limit\nof Rs 1.5 lakhs as an investment to the fund per year. <\/p>\n\n\n\n<p>Therefore, the\napplicability of the tax provisions on the public provident fund would be nil\ndue to the upper limit on the maximum amount of contribution made to the fund\non an annual basis.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, the government has proposed to charge tax on the interest earned if the same is above Rs 2.5 lakhs. However, it shall be considerate to take into note that due to the upper limit provided on the maximum amount of contribution made, there will be no taxability of interest received on public provident fund.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/\">Mutual Fund Participation in ETCDs: New Norms Introduced by SEBI<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Budget 2021, announced by our Union Finance Minister, Ms. Nirmala Sitharaman, has declared to levy income tax on the amount earned as interest by an employee or an assessee if the same is in excess of Rs 2.5 lakhs in a financial year. In this blog, we will talk about the taxability of Interest [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2521,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[50],"tags":[408],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2520"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2520"}],"version-history":[{"count":4,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2520\/revisions"}],"predecessor-version":[{"id":2525,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2520\/revisions\/2525"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2521"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}