Contribution is made in the Provident Fund for the employee's welfare by the employee and the employer. The deduction is available under section 80C.
Provident fund is a kind of security fund in which the employees contribute a part of their salary and the employer also contributes on behalf of their employees. Section 10(11) and 10(12) of the Income Tax Act defines the exemption on the amount added to the provident fund. Additionally, the amount allowed as a deduction on contributing to the provident fund is dealt in section 80C of the Income Tax Act. The types of provident funds are:
Particulars | Recognised Provident Fund | Unrecognised Provident Fund | Statutory Provident Fund | Public Provident Fund |
Employer’s Contribution | Exempt upto 12% of salary and contribution beyond 12% is taxable | Not taxable | Not taxable | Not Applicable |
Employee’s Contribution | Section 80C Deduction | No Section 80C deduction | Section 80C Deduction | Section 80C Deduction |
Interest on PF | Interest upto 9.50% p.a. is exepmpt and beyond 9.50% p.a. is taxable
|
Not taxable | Exempt | Exempt |
Amount withdrawn at retirement | Exempt subject to certain conditions*. | Contribution from employer and interest thereon is taxable. Employee contribution is not taxable. Interest on employees contribution is taxable as Income from Other Sources. | Exempt | Not Applicable |
*Conditions:
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