Rule 277 computes taxable interest on provident fund contributions above the threshold as the interest accrued in a separate "taxable contribution account", kept from tax year 2021-22, with a threshold of Rs. 5,00,000 where the employer makes no contribution and Rs. 2,50,000 otherwise.
277
Rules 2026 · Rule 277
Calculation of taxable interest relating to contribution in a provident fund or recognised provident fund, exceeding specified limit
Rules 261-310
Computation (sub-rules 1 and 2). Taxable interest is the interest accrued in the taxable contribution account during the tax year. Separate accounts for taxable and non-taxable contributions are kept within the provident fund account from tax year 2021-22 onwards.
The two accounts (sub-rule 3). The non-taxable contribution account is the closing balance on 31 March 2021, plus contributions in 2021-22 and later years not included in the taxable account, plus the interest on both, less withdrawals. The taxable contribution account is contributions in a year, from 2021-22, in excess of the threshold limit, plus the interest on them, less withdrawals. "Taxable interest" is interest accrued in the year that is not exempt from inclusion in total income.
Threshold limit (clause d). Rs. 5,00,000 where the person's employer makes no contribution; Rs. 2,50,000 in other cases.