Taxability of Different Provident Funds under Income Tax Act

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Taxability of Different Provident Funds under Income Tax Act

Taxability of Different Provident Funds under Income Tax Act:

Whenever any employee joins the company, he should know in which fund his employer is contributing his share. So that he can know his taxability.

Sr. No. Particulars SPF RPF UPRF PPF
1 Employee’s/ Assessees’ Contribution Deduction u/s 80 C is available  from total income subject to the limit specified therein Deduction u/s 80 C is available  from total income subject to the limit specified therein No deduction u/s 80 C is available. Deduction u/s 80 C is available  from total income subject to the limit specified therein
2 Employer’s Contribution Fully exempt from tax Exempt upto 12% of Salary

 

Amount in excess of 12% is included in gross salary

Not exempt but also not taxable every year. Not Applicable
3 Interest on Provident Fund Fully Exempt from tax Exempt upto 9.5% u/s 10

 

In excess of 9.5% in included in salary

Not exempt but also not taxable every year. Fully Exempt
4 Repayment of lump sum amount on retirement/ resignation/

termination

Fully Exempt u/s 10(11) Exempt subject to certain condition.** Accumulated employee’s contribution is not taxable. But interest on his share is taxable as income from other source.

 

But accumulate employers contribution + interest is taxable as profit in lieu of salary.

 

Fully Exempt u/s 10(11)

** What are the certain conditions?

(1) If employee has rendered continuous service with his employer for the period of 5 years or more

(2) If, though he has not rendered such continuous service of 5 years, the service has been terminated

-By reason of such employee’s ill health

-By the contraction or discontinuation of the employers business

-Or the other cause beyond the control of the employee

 (3) If, on the cessation of his employment, the employee obtains employment with any other employer , to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognized fund maintained by such employer

However in a situation mentioned under clause (3) above for calculating period of service for clause (1) and (2) above the periods for which such employee rendered continuous service under former employer or employers aforesaid shall also be included.

By  CA. Monika  N Rathi


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