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 The amount invested in the fund can be withdrawn after a specified time or after attaining specific age.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.
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Fund |
Details |
Employer Contribution |
Employee Contribution |
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RPF |
For salaried individuals (approved by |
Yes |
Yes |
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commissioner of Income Tax) |
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URPF |
For salaried individuals (Not recognised |
Optional |
Yes |
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by commissioner of Income Tax) |
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SPF |
For government employees, university |
Yes |
Yes |
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employees |
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PPF |
For general public |
Not applicable (as there |
Yes |
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will be no employer) |
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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
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Fund |
Employer contribution |
Employee contribution |
Interest on contribution |
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RPF |
Exempt upto 12% of Salary1 |
Deduction u/s 80C is available |
Exempt upto 9.5% pa |
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URPF |
Not taxable |
No deduction is available |
Not taxable |
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SPF |
Not taxable |
Deduction u/s 80C is available |
Not taxable |
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PPF |
Not Applicable |
Deduction u/s 80C is available |
Exempt upto 9.5% pa |
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Taxability of PF at the time of withdrawal |
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Fund |
Employer |
Interest on Employer |
Employee |
Interest on Employee |
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contribution |
contribution |
contribution |
contribution |
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RPF |
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See Note below |
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URPF |
Fully taxable as |
Fully taxable as Salary |
Not taxable |
Fully taxable under |
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Salary |
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other sources |
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SPF |
Not taxable |
Not taxable |
Not taxable |
Not taxable |
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PPF |
Not Applicable |
Not Applicable |
Not taxable |
Not taxable |
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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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