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Exemption in respect of Amount Received from any Provident Fund (PPF/SPF/RPF/URPF) [Section 10(11), 10(12)]

The tax treatment of various items in case of different provident funds is as follows:

Payment from Statutory Provident Fund [Section 10(11)]

Statutory Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee

Interest

Interest credited to such fund is exempt in the hands of the employee.

Amount received at the time of termination

Lump sum amount received from such fund, at the time of termination of service is exempt in the hands of employees.

Payment from Recognised Provident Fund [Section 10(12)]

The accumulated balance due and becoming payable to an employee participating in a recognised provident fund, is exempt to the extent provided in rule 8 of part A of the Fourth Schedule.

Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund, up to 12% of salary is not treated as income of the employee (see Note 1).

Interest

Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee, interest in excess of 9.5% is charged to tax in the hands of the employee.

Amount received at the time of termination

If certain conditions are satisfied, then lump sum amount received from such fund, at the time of termination of service, is exempt in the hands of employees. (see Note 2)

 

Un-Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee.

Interest

Interest credited to such fund is exempt in the hands of the employees.

Amount received at the time of termination

(See note 3)

 

Public  Provident Fund

Employer’s Contribution

Employers do not contribute to such fund

Interest

Interest credited to such fund is exempt.

Amount received at the time of termination

Lump sum amount received from such fund at the time of termination of service is exempt from tax

 

Notes:
1. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

2. Accumulated balance paid from a recognised provident fund will be exempt from tax in following cases:

(a)       If the employee has rendered a continuous service of 5 years or more. If the accumulated balance includes amount transferred from other recognised provident fund maintained by previous employer, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.

(b)       If the service of employee is terminated before the period of 5 years, due to his ill health or discontinuation of business of the employer or other reason beyond his control.

(c)        If on retirement, the employee takes employment with any other employer and the balance due and payable to him is transferred to his individual account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.

Except above situations, payment from a recognised provident fund will be charged to tax considering such fund as un-recognised from the beginning (See note 3 given below for tax treatment of un-recognised provident fund).

3.         Treatment of payment (at the time of termination) from un-recognised provident fund:

Payment on termination will include 4 things, viz., employee's contribution and interest thereto and employer’s contribution and interest thereto, the tax treatment of such payment is as follows:

·        Employee's contribution is not chargeable to tax; interest on employee contribution is taxed under the head “Income from other sources”.

·        Employer's contribution and interest thereon are taxed as salary income, however, an employee can claim relief under section 89 in respect of such payment.

Index of Exempted Incomes (Section 10)
 

Related Topics.... Exempted Incomes :

List of Exempted Incomes (Tax-Free) Under Section-10
Section-wise Index of Exempted Incomes Under Section 10
Gratuity Received by a Non-Government Employee covered by Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
Gratuity [Section 10(10)]
Commuted value of Pension Received is Exempt from Tax [Section 10(10A)]
Amount received as Leave Encashment on Retirement [Section 10(10AA)]
Retrenchment Compensation received by Workmen [Section 10(10B)]
'Retirement Compensation' from a Public Sector Company or any other Company is Exempt from Tax [Section 10(10C)]
Any sum received under a Life Insurance Policy [Section 10(10D)]
Exemption in respect of Amount Received from any Provident Fund (PPF/SPF/RPF/URPF) [Section 10(11), 10(12)]
Payment from Superannuation Fund [Section 10(13)]
House Rent Allowance-HRA [Section 10(13A) Read with Rule 2A]
Any Allowance given for meeting Business Expenditure [Section 10(14)]
Interest Incomes [Section 10(15)]
Income of certain Funds of National Importance, Educational Institutions and Medical Institutions [Section 10(23C) and Rules 2C and 2CA] :
Income of Core Settlement Guarantee Fund [Section 10(23EE)]
Any income of a Corporation established for Ex-Servicemen [Section 10(26BBB)]
Certain Interest to Non-Residents [Section 10(4)]
Leave Travel Concession or Assistance (LTC/LTA) [Section 10(5)]
Salary or Remuneration to Foreign Employee and Non-Resident Member of Crew [Section 10(6)]



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