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    Taxability of Provident Fund

    Provident Fund: 

    The Act that governs Provident fund in India is the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Provident fund is a scheme where by employer and / or employee will contribute to an investment fund. The amount invested in the fund can be withdrawn after a specified time or after attaining specific age. 

    Types of Provident Fund: 

    • Recognised Provident Fund; 
    • Unrecognised Provident Fund;
    • Statutory Provident Fund; and
    • Public Provident fund.

     

    Fund

    Details

    Employer Contribution

    Employee Contribution

     

    RPF

    For salaried individuals (approved by

    Yes

    Yes

     

    commissioner of Income Tax)

     

     

     

     

    URPF

    For salaried individuals (Not recognised

    Optional

    Yes

     

    by commissioner of Income Tax)

     

     

     

     

    SPF

    For government employees, university

    Yes

    Yes

     

    employees

     

     

     

     

     

     

     

     

     

    PPF

    For general public

    Not applicable (as there

    Yes

     

     

    will be no employer)

     

     

     

     

     

     

     

     

     

     

    Note: The major difference between URPF and PPF is that, URPF is not recognised by the government. 

    Whereas PPF is recognised by the government. 

    Taxability of PF at the time of contribution

     

    Fund

    Employer contribution

    Employee contribution

    Interest on contribution

     

     

     

     

     

    RPF

    Exempt upto 12% of Salary1

    Deduction u/s 80C is available

    Exempt upto 9.5% pa

     

     

     

     

     

    URPF

    Not taxable

    No deduction is available

    Not taxable

     

     

     

     

     

    SPF

    Not taxable

    Deduction u/s 80C is available

    Not taxable

     

     

     

     

     

    PPF

    Not Applicable

    Deduction u/s 80C is available

    Exempt upto 9.5% pa

     

     

     

     

     

     

     

     

     

     

     

    Taxability of PF at the time of withdrawal

     

     

     

     

     

     

     

     

     

     

    Fund

    Employer

    Interest on Employer

    Employee

    Interest on Employee

     

    contribution

    contribution

    contribution

    contribution

     

     

     

     

     

     

     

     

     

    RPF

     

    See Note below

     

     

     

     

     

     

     

     

     

    URPF

    Fully taxable as

    Fully taxable as Salary

    Not taxable

    Fully taxable under

     

    Salary

     

     

    other sources

     

     

     

     

     

     

     

    SPF

    Not taxable

    Not taxable

    Not taxable

    Not taxable

     

     

     

     

     

     

     

    PPF

    Not Applicable

    Not Applicable

    Not taxable

    Not taxable

     

     

     

     

     

     

     

     

     

    Note - Taxability of Recognised Provident Fund at the time of withdrawal:

    • Iftheemployer worked for a minimum period of 5 years, then the whole amount received shall be exempted from Income Tax.
    • Iftheemployee has transferred the PF amount from one employer to another employer at the time of changing the company, the period for which the employee has worked in the previous company shall be included in the period of minimum 5 years with the new company. 
    • Iftheemployee has left the organisation due to unavoidable reasons (illness, discontinuance of business etc.) then the period of 5 years won’t be applicable.
    • Iftheabove conditions are not satisfied, then
    • Employercontribution – The amount which is not taxed earlier is now taxable as salary income àEmployeecontribution – Not taxable 
    • Intereston Employer contribution – Interest contribution which is not taxed earlier is now taxable as salary income 
    • Intereston Employee contribution – Interest contribution which is not taxed earlier is now taxable under income from other sources

     

    Payment of Accumulated balance due to an employee (Section 192A): 

    • ThisSection is introduced by The Finance Act, 2015 and is made effect from 01/06/2015; èWheretheprovident fund is includable in the total income of the employee, TDS @ 10% is needed
    • to be deducted if the gross amount payable is more than or equal to Rs. 30,000 (the limit has been enhanced to Rs. 50,000 w.e.f 01/06/2016); 
    • Iftheemployee is not able to provide the PAN, then tax is needed to be deducted @ maximum marginal rate i.e 34.61%

     

    Other Points: 

    • Atthetime of change in employment, Form 13 is needed to be filed with the new employer. 
    • Forwithdrawal of provident fund Form 19 is needed to be submitted.
    • Forthepurpose of claiming advance, Form 31 is needed to be submitted.

     

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