The Central Board of Direct taxes (CBDT) has allowed tax exemption on the 9.5 per cent interest income on provident fund (PF) deposits for 2010-11.
This move has removed doubts on whether the additional one percentage point interest income earned by EPFO subscribers for 2010-11 would be tax exempt or not.
About 4.7 crore EPFO subscribers would benefit from the latest CBDT decision. Prior to this move, tax exemption was available only for interest income of 8.5 per cent.
The Employees Provident Fund Organisation (EPFO) had for 2010-11 hiked the interest rate on PF deposits to 9.5 per cent from 8.5 per cent in the previous year.
The latest CBDT decision would be effective from September 1, 2010, according to a notification issued by the Revenue Department.
“The CBDT move is welcome relief and provides parity to the interest rate prescribed by the EPFO,” said Mr Aseem Chawla, Tax Partner, Amarchand & Mangaldas.