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Leaving aside the separate rules for contributions above prescribed limits, which part of the interest credited to an employee's recognised provident fund account is included in the employee's total…

Question and options

Leaving aside the separate rules for contributions above prescribed limits, which part of the interest credited to an employee's recognised provident fund account is included in the employee's total income under Part A of Schedule XI to the Income-tax Act, 2025?

  1. Only interest above the rate notified by the Government

  2. Interest on the employer's contributions alone

  3. Only interest above 12 per cent a year

  4. The whole of the interest, at whatever rate

Answer and explanation

Correct answer: A - Only interest above the rate notified by the Government

Paragraph 6(b) of Part A of Schedule XI to the Income-tax Act, 2025 includes interest credited on the balance only in so far as it is allowed at a rate exceeding the rate fixed by the Central Government by notification. The 12% figure in the same paragraph is the limit for employer contributions as a share of salary, not an interest rate.

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