20 December 2013
This fund is one which is recognized by the Commissioner of Income tax in accordance with the rules contained there in the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952. According to this Act, any organization, which employs 20 or more persons, is obligated to register under the Act and start a PF scheme for the employees in the organisation.
Taxability:
• Employer’s contribution to provident fund – Exempt up to 12% of salary – excess is taxable
• Deduction under Section 80C – Available for employee’s own contribution
• Interest credited to provident fund – Exempt up to notified rate (now 9.5%)
• Payment at retirement – Taxable except in following under mentioned circumstances -
The employee should have rendered continuous service with his employer for 5 years or more; or if not so, he should have been terminated due to ill health, due to discontinuation of employer’s business or by reason beyond his control. If he has found another employment, the balance due to him should have been transferred to his account in the recognised provident fund of the new employer.
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