Paper 4: Taxation Section A: Income Tax Law: Statutory Update For November, 2021 Examination

PAPER 4: TAXATION
SECTION A: INCOME TAX LAW

STATUTORY UPDATE FOR NOVEMBER, 2021 EXAMINATION
The October, 2020 edition of the Study Material, based on the provisions of Income-tax law,
as amended by the Finance Act, 2020 and significant notifications/circulars issued upto
30.4.2021, are relevant for November, 2021 examinations. The relevant assessment year for
November, 2021 examination is A.Y.2021-22. The significant notification issued upto 30 th
April, 2021, relevant for November, 2021 examination but not covered in the October, 2020
edition of the Study Material, is given hereunder:
Chapter 4 - Unit 1: Salaries
Manner for computation of taxable perquisite under section 17(2)(viia) [Notification No. 11/
2021, dated 5.3.2021]
The amount or aggregate of amounts of any contribution made in a recognised provident fund, in
NPS referred to in section 80CCD(1) and in an approved superannuation fund by the employer to
the account of the assessee, to the extent it exceeds Rs. 7,50,000 would be perquisite by virtue of
section 17(2)(vii). Consequently, section 17(2)(viia) provides that any annual accretion by way of
interest, dividend or any other amount of similar nature during the previous year to the balance at
the credit of the recognized provident fund or NPS or approved superannuation fund to the extent it
relates to the employer’s contribution which is included in total income in any previous year under
section 17(2)(vii), computed in prescribed manner would also be perquisite taxable under the head
“Salaries”.
Accordingly, the CBDT has, vide this notification, prescribed the following formula to compute the
annual accretion by way of interest, dividend or any other amount of similar nature during the
current previous year to the balance to the credit of the recognized provident fund or NPS or
approved superannuation fund to the extent it relates to the employer’s contribution in excess of
Rs. 7,50,000, included in total income in any previous year:
TP = (PC/2)*R + (PC1+ TP1)*R
TP Taxable perquisite under of section 17(2)(viia) for the current previous year i.e. P.Y.
2020-21;
TP1 Aggregate of taxable perquisite under section 17(2)(viia) for the previous year or years
commencing on or after 1.4.2020 other than the current previous year (See Note)
PC Amount or aggregate of amounts of employer’s contribution in excess of Rs. 7.5 lakh to

the specified fund or scheme during the previous year i.e., P.Y. 2020-21
PC1 Amount or aggregate of amounts of employer’s contribution in excess of Rs. 7.5 lakh to
the specified fund or scheme for the previous year or years commencing on or after 1st
April, 2020 other than the current previous year (See Note)
R I/ Favg ;
I Amount or aggregate of amounts of income accrued during the current previous

year in the specified fund or scheme account
Favg (Amount or aggregate of amounts of balance to the credit of the specified fund
or scheme on the first day of the current previous year i.e., on 1st April, 2020 +
Amount or aggregate of amounts of balance to the credit of the specified fund or
scheme on the last day of the current previous year i.e., on 31st March, 2021)/2
Specified fund or scheme means recognised provident fund, NPS referred to in section 80CCD(1)
and an approved superannuation fund
Note: Where the amount or aggregate of amounts of TP1 and PC1 exceeds the amount or
aggregate of amounts of balance to the credit of the specified fund or scheme on the first day of
the current previous year, then, the amount in excess of the amount or aggregate of amounts of
the said balance shall be ignored for the purpose of computing the amount or aggregate of
amounts of TP1 and PC1.
It may be noted that the second part of the formula, namely (PC1 + TP1) x R, will not be relevant
for P.Y.2020-21, since this is the first previous year for which this perquisite valuation provision is
applicable. Therefore, this part of the formula may be ignored while computing perquisite value for
A.Y.2021-22.
Example: Suppose X Pvt. Ltd. contributed Rs. 8,50,000 during the previous year 2020-21 towards
recognised provident fund to the account of Mr. A. Mr. A had also made an equivalent contribution.
Balance in his RPF A/c as on 1.4.2020 is Rs. 32,00,000. Interest accrued in his RPF during the
previous year 2020-21 is Rs. 3,44,250. The taxable perquisite under section 17(2)(viia) for
P.Y.2020-21 would be computed in the following manner:
TP= (PC/2)*R + (PC1+ TP1)*R

= (1,00,000/2) x 0.08153 + (Nil + Nil) x 0.08153 =
TP Taxable perquisite under of section 17(2)(viia) for P.Y. 2020-21 4,077
TP1 Aggregate of taxable perquisite under section 17(2)(viia) for the Nil
previous year or years commencing on or after 1.4.2020 other than
(since this is the first
the current previous year
year of taxability of
such perquisite)
PC Amount or aggregate of amounts of employer’s contribution in Rs.1,00,000 (i.e.,

excess of Rs. 7.5 lakh to the RPF during the P.Y. 2020-21 Rs.8,50,000 –
Rs.7,50,000)
PC1 Amount or aggregate of amounts of employer’s contribution in Nil (Since this is the
excess of Rs. 7.5 lakh to the RPF for the previous year or years first previous year
commencing on or after 1st April, 2020 other than the current for taxability of such
previous year. perquisite)
R I/ Favg 0.08153
(3,44,250/42,22,125)
I Amount or aggregate of amounts of income accrued Rs. 3,44,250

during the P.Y.2020-21 in the RPF
Favg (Amount or aggregate of amounts of balance to the credit (Rs. 32,00,000 +

of the RPF on 1.4.2020, being the first day of the current Rs. 52,44,250)/2 =
previous year + Amount or aggregate of amounts of
Rs. 42,22,125
balance to the credit of RPF on 31.3.2021, being the last
day of the current previous year)/2
Note = Rs.32,00,000
+ Rs.8,50,000 +
Rs. 8,50,000 +
Rs.3,44,250 =
Rs.52,44,250
Note - The last date for intimating Aadhaar number under the Income-tax Act, 1961 for the
purposes of linking Aadhaar with PAN has been extended from 31 st March, 2021 to 30th
June, 2021 [Section 139AA]

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PAPER 4: TAXATION

SECTION A: INCOME TAX LAW

TP = (PC/2)R + (PC1+ TP1)R

PC Amount or aggregate of amounts of employer’s contribution in excess of Rs. 7.5 lakh to

I Amount or aggregate of amounts of income accrued during the current previous

TP= (PC/2)R + (PC1+ TP1)R

TP Taxable perquisite under of section 17(2)(viia) for P.Y. 2020-21 4,077

PC Amount or aggregate of amounts of employer’s contribution in Rs.1,00,000 (i.e.,

I Amount or aggregate of amounts of income accrued Rs. 3,44,250

Favg (Amount or aggregate of amounts of balance to the credit (Rs. 32,00,000 +

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