Tax treatment of Provident Fund?EPF SPF PPF URPF

Posted Date : 24-Jul-2012 , 02:11:21 pm | Posted By CASANSAAR print

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Tax treatment of Provident Fund?EPF SPF PPF URPF

Both the employer and employee contribute towards Provident Fund. The contribution made by employees is out of their own income and therefore no question of taxation arises as the entire amount has already been taxed. The contribution by the employer is over and above salary of employee and therefore is seen as income of employee and taxed. The interest earned on the Provident Fund balance is on both employer as well as employee contributions, and this interest is also an income of employee and therefore taxed.

The detailed tax treatment of different kinds of provident funds is little technical. There are rules that govern whether a certain fund will be taxable or not, the technical details of which are shown here.

Tax treatment of Provident Fund can be discussed under two scenarios:

One during continuity of job, and
Upon receipt of accumulated balance of provident fund at the time of retirement or resignation

The table below shows the tax treatment of different kinds of provident funds:

Fund	During Continuity of Job			Upon Retiremen
	Employee's Contribution	Employer's Contribution	Interest on Provident Fund	Repayment of sum on retirement, resignation or termination
RPF	Deductionunder Section 80C is available.	Exempt upto 12% of Salary. Thus Contribution made by employer exceeding 12% shall be added to employee's salary Income.	Exempt upto 9.5%. Interest exceeding 9.5% shall be added to employee's Salary Income.	Nothing is taxable subject to following conditions: Employee left the job after five years of service OR Where Period of service less than 5 years, the termination is due to ill health, discontinuance of business of employer. OR here on re-employment, the balance in R.P.F is transferred to R.P.F with new employer. [For the purpose of computing 5 years period, Period of services rendered with previous employer shall also be included.] If none of the above conditions are satisfied then: The amount not taxed earlier shall be taxed in the same manner as URPF, given below. Any tax concession (e.g. 80C) availed by assesses for contribution to RPF shall now be withdrawn.
URPF	No deduction under section 80C available	Any amount of contribution is not taxable	Not taxable	Sum received on retirement/ termination comprise of following: Employer's Contribution and interest there on: Taxable as Salary Income. Employee's own Contribution : It is not taxable. Interest on employee's contribution: Taxable as income from other sources.
SPF	Deduction under Section 80C is available.	Fully Exempt	Fully Exempt	Fully Exempt
PPF	Assessee / Employee can make contribution to PPF, No concept of Employer’s Contribution. Deduction under section 80C available on contribution made.			Amount received (including interest) is Fully Exempt.