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What is Provident Funds(PF)?

Provident Funds provides a compulsory contribution for the future of an employee after his retirement or for his dependents in case of his early death.In such fund employee and employer contribute equally. It is compulsory for any organization in which more than 20 employee working to contribute in Provident fund

What are the Types of Provident Fund?

Types of Provident Funds:

*       Statutory Provident Fund

*       Recognized Provident Fund

*       Unrecognized Provident Fund

*       Public Provident Fund

What is Statutory Provident Fund(SPF)?

Statutory Provident Fund is set up under the provisions of the Provident Fund Act, 1925.This fund is maintained by Government and Semi-Government organizations, local authorities, railways and other institutions

What is Recognized Provident Fund(RPF)?

Recongnized Provident fund is one which is recognized by the Commissioner of Income tax in accordance with the rules contained there in Act.This fund is maintained by private sector organizations

What is the unrecongnized Provident Fund(URPF)?

Unrecongnize Provident Fund is that provident fund which is not recognized by the Commissioner of Income tax in accordance with the rules contained there in Act. Unlike a statutory provident fund, recognized provident fund or public provident fund.

What is Public Provident Fund(PPF)?

The Central Government has established the Public Provident Fund for the benefit of general public to mobilize personal savings.A salaried employee can simultaneously become a member of employees’ provident fund and the public provident fund.

What is Tax Treatment of Different Provident Fund?

 

Statutory Provident Fund

Recognized Provident Fund

Unrecognized Provident Fund

Public Provident Fund

1

2

3

4

5

Employer’s contribution to provident fund

 

Deduction under Section 80C

 

Interest credited to provident fund

 

Lump-sum payment at retirement

Exempt from tax

 

 

Available

 

 

Exempt

 

 

Exempt

Exempt up to 12% of salary - excess is taxable

 

Available

 

 

Exempt up to notified rate (now 8.5%)

Exempt in some cases

Exempt from tax

 

 

 

Not available

 

 

Exempt

 

 

Employee contribution is exempt

Employer does not contribute

 

 

Available

 

 

Exempt

 

 

Exempt

 

What is the deduction available for contribution of provident funds?

From assessment year 2006-07, section 80C provides for an outright deduction on certain contributions/payments subject to three basic conditions:

*     The contributions/payments must have been made during the relevant previous year

*     The aggregate amount qualifying for deduction should not exceed Rs.1 Lakh

*     The sum paid or deposited need not be out of income chargeable to tax but deduction should not exceed income which is chargeable to income tax.

 

This has reference to Section 80C of Income Tax Act

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