Taxpayers who missed declaring taxable EPF interest for FY 2024-25 have limited options for correction. According to reports from The Economic Times, the time period for filing revised Income Tax Return for FY 2024-2025 has expired, making it impossible to file a revised ITR now. However, the Income Tax Act 1961 provides for filing an Updated ITR within 48 months from the end of the assessment year, which is still available for this financial year.
The taxable interest on provident fund accounts falls under 'Income from Other Sources' and offers taxpayers two calculation methods. As reported by The Economic Times, taxpayers can either offer the income on 'accrual basis' or 'receipt basis' for income under 'Profits and Gains of Business or Profession' or 'Income from Other Sources'. The taxable interest on provident fund account is taxed under the head 'Income from Other Sources', making both calculation methods applicable.
For those choosing the Updated ITR route, taxpayers can disclose the proportionate interest for financial year 2024-2025 by paying additional tax in addition to the tax and interest due. According to The Economic Times, this option requires paying additional tax in addition to the tax and interest due for the financial year. The filing must be completed within the 48-month window from the end of the assessment year.
As an alternative to Updated ITR, taxpayers can choose to offer the interest for that year in the year in which they withdraw the outstanding balance in provident fund account on receipt basis. As reported by The Economic Times, this method allows taxpayers to defer the tax liability until the actual withdrawal occurs. However, taxpayers may have to pay tax at higher slab rate if their total income including such interest is high when using this receipt basis approach.
