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9/29/2016

DifferentTypesofProvidentFundandTaxBenefitRelatedtoInvestmentinProvidentFund|Finhealth.in

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DifferentTypesofProvidentFundandTaxBenefit
RelatedtoInvestmentinProvidentFund
PostedonAugust20,2013August24,2013byFinhealth
Therearedierenttypesofprovidentfund(PF)whichareusedbyindividualforinvestmentand
savingpurposeandeachishavingdierenttaxtreatment.
ButBroadlyProvidentfundcanbecategoriesintofourcategories
1.StatutoryProvidentFund(SPF)
2.RecognizedProvidentFund(RPF)
3.UnrecognizedProvidentFund(URPF)
4.Publicprovidentfund(PPF)
Explanation
1.SPFisspeciallypreparedforinvestmentinprovidentfundaccountmanagedbythegovernment
forgovt.employees.
2.RecognizedprovidentfundisaschemetowhichPFAct1952applies.AccordingtothisAct,a
personwhoappoints20ormoreemployeesthenheisliabletoregisterhimselfunderthePFact.
1.Theconcernmayjointhegovt.schemesetupbythePFCommissioner.
2.Canbemanagedbyemployerhimselfbycreatingthetrustfortheprovidentfundandgetthe
approvalofCIT.Thistypeofstructureisgenerallycreatedbytheverylargeorganizations.
3.URPFisaschemestartedbytheemployer&isnotapprovedbytheCIT.
4.UnderPPFanymemberfrompublicwhetherisinemploymentornotmaycontributetothis
fund.TheminimumcontributionisRs.500p.a.&maximum70000Rs.p.a.,amountisrepayable
after15yearswithinterest@8%p.a.Fromtheincometaxperspectivebestisstatutoryprovident
fundmeansPFwhichiscompulsoryinnatureofgovt.employeesandEmployercontributionis
taxfreeandemployeecanclaimtaxdeductionundersection80Coftheincometaxsubjectto
maximumlimitofRs100,000/

Statutoryprovidentfund
Employerscontribution

Taxfreeexempt

Employeecontribution

Deductionu/s80C

Interestoncontribution

Taxfree

Eectattimeofthereceipt

Noeect

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9/29/2016

DifferentTypesofProvidentFundandTaxBenefitRelatedtoInvestmentinProvidentFund|Finhealth.in

Recognizeprovidentfund
Employerscontribution

Exemptupto12%

Inexcessof12%taxableintheyearofcontribution

Employeecontribution

Deductionu/s80C

Interestoncontribution

Exemptupto9.5%

Inexcessof9.5%taxableassalaryintheyearofaccrued

Eectattimeofthereceipt

IfconditionsaresatisedthenRPFamountisfullyexempt(seenote)

Unrecognizedprovidentfund
Employerscontribution

Taxfreeintheyearofcontribution

Employeecontribution

Deductionu/s80CNotavailable

Interestoncontribution

Taxfreeintheyearofcontribution

Eectattimeofthereceipt

1.Employerscontribution
2.Employeecontribution
3.Interestonemployerscontribution
4.Interestonemployeecontribution

Fullytaxable
Noeect
Taxableassalary
Taxableasincomefromothersources

Note
AtthetimeofretirementRPFisfullyexemptifanyoneofthefollowingconditionsissatised:
1.Serviceisprovidedfortheperiodof5yearsormore
2.Ifserviceperiodislessthan5yearsbutreasonswereoutofcontrol,e.g.illhealth,business
discontinuedbytheemployer,etc.
3.Serviceperiodislessthan5yearshehasjoinedanotheremployer&balanceinRPFaccountis
transferredinRPFaccountofnewemployerinthiscaseconsiderserviceperiodofprevious
employeralsoforthepurposeof5yearswhilecheckingconditionsofRPF.
Ifatthetimeofretirementanyofthe3conditionsarenotsatisedthen2treatments
1.Employerscontributionwhichwasexemptinearlieryearsnowtaxableinthepreviousyearof
retirement(I.e.12%ofsalarywhichwasexemptnowcancelled)
2.Interestonemployers&employeescontributionwhichwasexemptinearlieryears(9.5%)now
taxable.

PostedinIncomeTax TaggedIncometax,PublicProvidentFund,Receipt,Salary,Statute,Tax,Tax
deduction,Taxexemption Leaveacomment
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