PF accounts earn interest until retirement age

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I am a trader. Is it mandatory that I file income tax returns for the trading profits and losses that I have recorded? What is the process involved?

—Sainath

It is assumed that the profit and loss occurred in fiscal year 21. As a general rule, an individual taxpayer is required to file the Indian tax return if their gross taxable income in India (before specified deductions) exceeds 2.5 lakh.

Income or losses resulting from trading in stocks or derivative transactions may be considered business income or capital gains (depending on a detailed examination of factors such as trade volume, frequency of transactions, the average holding period and the financing method).

In the event that income from trading in equities or derivatives is considered business income, the tax return form applicable to you will be either ITR-3 or ITR-4 (depending on the satisfaction of all other conditions). In ITR-3, details of the corresponding sale and purchase should be disclosed in “Schedule P&L” and “Schedule BP” and in ITR-4, details of the corresponding sale and purchase should be disclosed in “Schedule BP”.

However, in the event that income from trading in stocks or derivatives is considered capital gains, the ITR form applicable to you will be ITR-2 (assuming you meet all other conditions). Details of the sale and corresponding purchase in relation to capital gains should be disclosed in “Annex CG”.

In addition, depending on turnover, gross revenue, business income and the nature of the business, the applicability of tax rates (normal or flat tax rates); the applicability of and compliance with the goods and services tax; the applicability of bookkeeping and the conduct of a tax audit should be assessed.

If an employee retires, the PF account accumulates interest for the next three years. Will this also be the case when an employee leaves an organization but has not transferred their account because they have not taken on a new job?

—Hemant Koppikar

In accordance with the provisions of the Provident Fund (PF) Act of India, a PF account becomes an “inoperative account” and no longer earns interest when an employee retires after reaching the age of 55 or migrates. permanently abroad or dies and does not apply for the withdrawal of his accumulated balance within 36 months. Until then, interest will continue to accrue on the PF balances. However, no interest will be accrued once the account becomes inoperative.

When an employee ceases his employment before reaching the age of 55 and no contribution has been made to the PF account afterwards (since he does not transfer his account because he has not taken a new employment), the employee must be able to earn interest on the PF account until the age of 58 or until the date of withdrawal, whichever occurs first.

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG India.

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