Taxability of Recognized Provident Fund

It is for Private employees

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Fund is recognized by Commissioner of Income tax

Employer’s contribution –

It is exempt up to 12% of salary .

Here ,Salary means

Basic + DA + Commission as percentage of turnover .

Note :–

If 13% contributed then 12% is exempt and balance 1% is  taxable .

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Interest on provident fund – it is exempt up to 9.5% p.a.

(If 10% received,10%-9.5% i.e 0.5% taxable)

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Employee’s contribution − it is treated saving under Section 80 C

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Withdrawal of P.F.

• If withdrawal after 5 year of service, then exempt
• If withdrawal before 5 year due to employees iIl-health or business being discontinued or any other reason beyond the control of employee then also exempt .
• If there is change in job and PF amount is transferred to new employer's PF account, then also exempt .
• If withdrawal due to any other reason (e.g., employee resigns from job and withdraws PF), then
  • Employer Contribution is taxable as profit in lieu of salary.
  • Employee Contribution: He would have earlier claimed 80C deduction. Now that deduction will not be available and tax will be recalculated for previous period
  • Even Interest on RPF is taxable under Income from Other Sources

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