Section 17(2)(vii)

Section 17(2)(vii) — the law in short

What the courts have decided on section 17(2)(vii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.80CCD(1B) and s.80CCD(2): the fifty-thousand NPS deduction that does NOT survive s.115BAC(1A), the employer contribution that does, and the fourteen per cent proviso inserted by Act No. 15 of 2024 CBDT Circulars & InstructionsCuts both ways
  My client is in the default regime under s.115BAC. Can he still claim the extra fifty thousand for NPS, and what is the ceiling on his employer's NPS contribution now?
  No on the first, better news on the second. Section 115BAC(2)(i) computes the total income of a person taxed under s.115BAC(1A) without any deduction under Chapter VI-A other than sub-section (2) of section 80CCD, sub-section (2) of section 80CCH and section 80JJAA — so the additional Rs. 50,000 deduction under s.80CCD(1B) is not available in the default regime, while the employer's contribution deduction under s.80CCD(2) is. On the ceiling: s.80CCD(2) allows fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 provides that where the total income is chargeable to tax under s.115BAC(1A), sub-section (2) has effect as if for the words "ten per cent" in clause (b) the words "fourteen per cent" had been substituted.
• Statutory position — s.10(11) and s.10(12) with Rule 9D: interest on the employee's own provident fund contribution above the annual threshold, why there are TWO thresholds, and the two-account mechanism from previous year 2021-22 CBDT Circulars & InstructionsCuts both ways
  My client's EPF interest certificate now shows a taxable interest figure and the return utility is picking it up. Where does that come from, is the threshold two and a half lakhs or five lakhs for him, and from when does it apply?
  It comes from the two provisos added to each of s.10(11) and s.10(12). The exemption does not apply to interest accrued during the previous year on so much of the person's own contribution as exceeds two lakh and fifty thousand rupees in any previous year in that fund, made on or after 1 April 2021; and the second proviso substitutes five lakh rupees for that figure where the contribution is to a fund in which there is NO contribution by the employer. So an ordinary EPF member whose employer contributes is on the Rs. 2,50,000 threshold, and a member of a fund to which the employer does not contribute — the General Provident Fund pattern — is on the Rs. 5,00,000 threshold. The computation is prescribed by Rule 9D, which requires separate taxable and non-taxable contribution accounts to be maintained within the provident fund account during previous year 2021-22 and all subsequent previous years, and which was inserted by the Income-tax (Twenty-fifth Amendment) Rules, 2021 with effect from 1 April 2022. Both provisos were inserted by clause (d) of section 6 of the Finance Act, 2021, with effect from 1 April 2022, so they first bite in assessment year 2022-23 even though the contributions they reach are those made on or after 1 April 2021.
• Statutory position — s.10(13) on the approved superannuation fund, and s.17(2)(vii)/(viia): the Rs. 7,50,000 AGGREGATE ceiling on the employer's contribution to provident fund, NPS and superannuation taken together, and the annual accretion on it CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client's Form 16 now shows a perquisite for the employer's contribution to the superannuation fund and to NPS. Is there a separate limit for each fund, and what is the extra line for annual accretion?
  There is one limit, not three. Section 17(2)(vii) makes the amount or the aggregate of amounts of any contribution made to the assessee's account by the employer in a recognised provident fund, in the scheme referred to in s.80CCD(1) and in an approved superannuation fund a perquisite to the extent it exceeds seven lakh and fifty thousand rupees in a previous year — a single aggregate figure across all three. Section 17(2)(viia) then makes the 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 those funds a further perquisite, to the extent it relates to the contribution already taxed under sub-clause (vii), computed in the manner prescribed. Separately, s.10(13) exempts payments out of an approved superannuation fund on the death of a beneficiary, to an employee in lieu of or in commutation of an annuity on retirement at or after a specified age or on incapacity, by way of refund of contributions on death, by way of refund of contributions on leaving service otherwise than by such retirement or incapacity to the extent the payment does not exceed the contributions made before the commencement of the Act and interest on them, and by way of transfer to the employee's account under a pension scheme referred to in s.80CCD and notified by the Central Government. Both sub-clauses date from 1 April 2021: section 13 of the Finance Act, 2020 substituted sub-clause (vii) and inserted sub-clause (viia) with effect from that date, so the aggregate ceiling first applies for assessment year 2021-22. Before that, sub-clause (vii) reached only the employer's contribution to an approved superannuation fund and only above one lakh and fifty thousand rupees, and there was no sub-clause (viia) at all.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.