Tax treatment of Recognized Provident Fund (RPF), Unrecognized Provident Fund (URPF), Statutory Provident Fund (SPF)
Section 10(11) and 10(12) of the Act deal with exemption on payments from provident funds, while section 80C of the act deals with allowance of deductions on contributions to provident funds. The following are the types of provident funds.
1. Recognized Provident Fund (RPF): This scheme is applicable to an organization which employs 20 or more employees. An organization can also voluntarily opt for this scheme. All RPF schemes must be approved by The Commissioner of Income Tax. Here the company can either opt for government approved scheme or the employer and employees can together start a PF scheme by forming a Trust. The Trust so created shall invest funds in specified manner. The income of the trust shall also be exempt from income taxes.
2. Unrecognized Provident Fund (URPF): Such schemes are those that are started by employer and employees in an establishment, but are not approved by The Commissioner of Income Tax. Since they are not recognized, URPF schemes have a different tax treatment as compared to RPFs.
3. Statutory Provident Fund (SPF): This Fund is mainly meant for Government/University/Educational Institutes (affiliated to university) employees.
4. Public Provident Fund (PPF): This is a scheme under Public Provident Fund Act 1968. In this scheme even self-employed persons can make a contribution. The minimum contribution is Rs. 500 per annum and the maximum contribution is Rs. 150,000 per annum. The contribution made along with interest earned is repayable after 15 years, unless extended. All about PPF and Income tax benefit
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
Summarized table showing tax treatment of provident funds
| Fund | During Continuity of Job | Upon Retirement | ||
| Employee’s Contribution | Employer’s Contribution | Interest on Provident Fund | Repayment of sum on retirement, resignation or termination | |
| RPF | Deduction under 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:
1. Employee left the job after five years of service OR 2. Where Period of service less than 5 years, the termination is due to ill health, discontinuance of business of employer. OR 3. 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.] 4. If the entire balance standing to the credit of the employee is transferred to his account under a pension scheme referred to in section 80CCD and notified by the central government. If none of the above conditions are satisfied then: 1. The amount not taxed earlier shall be taxed in the same manner as URPF, given below. 2. 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. | ||
Frequently asked Questions on Taxability of Provident Fund -Recognized, Unrecognized & Statutory
Q. When I left my earlier company, I opted for the withdrawal of my provident fund money that was being maintained by the company in a trust. The company deducted tax on withdrawal.I was under the impression that Employees Provident Fund is tax-free.Also, if I withdraw money from my Public Provident Fund account will that also be subject to tax?
A. We presume your earlier company maintained a recognised provident fund account, which is referred to as RPF. On withdrawal from RPF at the time of termination of service, the accumulated balance is exempt from tax only if you have been in continuous service for a period of five years or more. Service rendered to the previous employer is also to be included. If the continuous service is less than five years due to reasons beyond your control (ill health, or discontinuance of employer’s business), you still will be eligible for exemption. If not, then you will be taxed on withdrawal of the accumulated balance from the RPF. Withdrawals from the PPF account is based on defined eligibility criteria. Such withdrawals are not taxed.
Q. I have got an offer from a company who has filed for an exemption from Provident Fund laws.
1. Is it legal to have such exemptions?
2. What are my alternatives to proceed with this company with respect to my PF account with my current company?
3. Can I still contribute to the PF account and what will be the tax benefits on the same?
A. Section 16 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, stipulates certain conditions that need to be satisfied for an establishment to be exempted from the operation of this Act. So it may be possible that this company is availing of the exemption legally. In respect of your PF account with your earlier employer, you could choose either of the following propositions:
Close the account and withdraw the balance lying to your credit. If your contributions are pertaining to five or more years of continuous period of employment, then there would be no tax impact on such withdrawal.
Transfer the balance PF from your old employer to your new employer. In this case, though, there would be no fresh contributions during your employment with the new employer.
Q. I have changed my job. Can I transfer my Provident Fund deducted by the previous employer to my Provident Fund account with the new employer?
A. Yes, you can transfer your old Provident Fund account to your new employer. The process to do this is very simple. Upon your change in employment, file a Form 13 with the new employer. Thereafter, the labour consultant or human resources department of your new employer shall follow up on the transfer process with the Provident Fund authorities.
Q. Can I take an withdrawal/advance from the balance accumulated in my Provident Fund account?
A. Yes, you can take a withdrawal/advance from your Provident Fund account. Here is the process:
- Upon resignation or retirement from an establishment you can apply for PF withdrawal using Form 19. Withdrawal is allowed under two options:
1. If the member has attained 55 years of age; or
2. The member should not work in any covered establishment for a period of 2 months from the exit date.
Additionally, you also have an option to withdraw funds from your Employee Pension Scheme. If you choose to do so, you will need to file an application using Form 10C.
- You can also take an advances from your Provident Fund account, but only for certain specified purposes. The application for an advance is made using Form 31. Advance may be availed for the following purposes:
-
- Marriage expenses for self, son, daughter and brother / sister
- Education for self, son, daughter
- Medical treatment
- Purchase or construction of dwelling house.
- Repayment of housing loan
- Purchase of plot
- Addition or alteration of house
- Repair of house
- Lockout or closure of establishment by employer
- Withdrawal prior to retirement
- Please note that the amount of advance or withdrawal is not required to be refunded back into the account under normal circumstances. However, if the amount is not utilized for the specified purpose, then the same will need to be refunded with penal interest.
- A fixed minimum balance in the account has to be maintained before arriving at the amount of advance that can be taken from the account.
Q. Interest Rate for PF
A. The rate of interest that you earn on your PF investment is fixed by the Central Government every year in March / April. The rate of interest changes every year, but due to the nature of politics in India, it is usually higher than the prevailing market rates.
Q. What is the taxability of interest on Provident fund deposits ?
The tax treatment of interest on Provident Fund is as follows
– Recognized Provident Fund:Interest on provident fund is exempt up to 9.5%. Interest exceeding 9.5% will be added to employee’s salary income
– Unrecognized Provident Fund: Not Taxable
– Statutory Provident Fund: Fully Exempt
– PPF: Fully exempt
(Republished with amendments)
Please tell me the treatment of Transferred balance from unrecognized provident fund to recognized provident fund within a same financial year
I worked for an employer for more than 13 years, who maintained the PF trust. I moved to another employer within a FY. However, due to some reason PF could not be transferred. My old employer PF trust continued the interest and have deducted TDS which is now reflected in my 26AS. Now can that interest be filed as an exempted income under section 10(12), as
I am still in service with another employer.?? How to file ITR in this scenario??
I worked for an employer , who maintained the PF trust for more than 13 years. I moved to another employer within a FY. However, due to some reason PF could not be transfered. My old employer PF trust continued the interest and have deducted TDS which is not reflected in my 26AS. Now can that interest be filed as an exempted income under section 10(12), as i am still in service with another employer.?? How to file ITR in this scenario??
What is difference in not taxable and fully exempt
I have withdrawn PF after 6 years but I worked for only 3 years. Is the PF taxable?
I have worked with a organisation for 4 years and previous to that worked for 1 year in another organisation.I transferred the previous organisations PF balance to the second organisation where I worked for 4 years. Will my withdrawal of PF balance in the second organisation taxable. There was also gap of 3 months of employment in the first and second organisation’s employment.
a person who held a DIN number and he is also an employee of an another company then will he be able to deduct his pf on salary.
I have joined the Agharkar Research Institute in 2007. At that time we have EPF provision. In 2011onwards we have been asked to opt for NPS Scheme. The money which we have deposited were EPF was stuck up. This year in 2018 some employees pursued that matter and closed our EPF amount and we got our stuck up money back. EPF people deducted 10 % tax on that as it is reflecting on 26 AS form. Do we have to pay more tax on it? Can this money will be considered in our source of Income?
Hi Can anyone clarify whether the pension under Pension Scheme which is received from the age of 58 from EPF fund is taxable ? Out of 12% employers contribution 8.33% goes to pension fund. As per IT act, after five years of continuous service the amount received from a recongnised provident fund is exempt. I want to know whether this exemption extends to pension received also ? (Over and above lumpsum amount received at the time of retirement)
MY HUSBAND WAS WORKING WITH LTD. CO. & E P F WAS DEDUCTED – HE EXPIRED IN 2015 & NOW I RECEIVED THE AMOUNT FROM EPF COMMISSIONER OF 3 LAC IN ALL – WILL IT BE TAXABLE IN MY ( WIFE’s) HAND OR EXCEMPT FROM TAX – WILL REPLY
i have retired from SBI on oct 2014. i received arrears of pay revision in 2015/16 of about 113000/ plus my PF contribution of 32000/-. now in my form 16 total salary is shown as 145000/- which is gross including my PF. ON RETIREMENT ENTIRE PF IS NOT TAXABLE SO PLEASE CLARFY MY TAX LAIBILITY
Sir
In excess of 9.5% will be taken of what amount?
Is it confirmed that post April 1, 2016 Interest accrued on 60% contribution will be taxed ?
.I am Ishan Sharma. I am 23 years old.i am interesting in taking a health insurance policy. But I am kidney transplant recipient. My transplant had done on 04-02-2015 in PGIMER,CHANDIGARH. I want to know about the policies which cover pre existing disease. Please suggest me.
I have worked for 4 years in a company till mid of dec 14 & Joined another company thereafter. I withdraw my PF accumulated for four year. the amount received after TDS. For 2015-16 year assessment, I filled ITR V with two form 16 received from both the employer. Now i receive a additional tax demand from CPC. was it required to show income from PF withdrawal in addition to taxable income from employer while filling ITR V.
I had worked for an oranization for more than 5 years, i have not withdrawn my pf from there.
– How will i know the status of my balance from previous organization.
– Will interest be paid on that balance ?
– Can i add that balance to my UAN ID ?
– The EPS balance does not get any interest , can i withdraw that.
– will i be taxed on withdrawing previous PF where i spent 5+yrs ?
Please clarify
Notification No. 69/2010 dated 26.08.2010
Notification of interest rate on RPF as 8.5% w.e.f. 1.9.2010, the interest in excess of which would be taxable as salary.
Rule 6 of Part A of the Fourth Schedule to the Income tax Act, 1961, provides, inter alia, that interest credited on the balance to the credit of an employee participating in a recognized provident fund in so far as it is allowed at a rate exceeding such rate notified by the Central Government, shall be deemed to have been received by the employee in the relevant previous year and shall be included in his total income.
Accordingly, the Central Government has notified, w.e.f. 1st September, 2010, in exercise of the powers conferred by Rule 6, 8.5% as the rate of interest on Employer’s annual contributions in a recognised provident fund. This implies that w.e.f. 1st September 2010 interest credited on the balance to the credit of the employee in excess of 8.5 percent shall be deemed to have been received by the employee in the previous year and shall be included in the total income of the employee. Prior to this date, the interest credited in excess of 9.5% was deemed to be the income of the employee.
Is there any change in this rule
Thanks for the insight. Please I have been dealing with a situation for a while now. I worked in India for more than 5 years as a foreigner and I have been unable to repatriate my PF because my bank requires that I confirm payment of my tax and my employer is not in a position to confirm such payment of tax on PF, neither can I get hold of the PF office. Please, is PF really taxable? I would appreciate your help. Thank you
If the employee’s basic + DA + Retaining allowance is ₹ 20000, should the employer’s contribution be calculated on ₹ 20000 or on ceiling limit ₹ 15000. Kindly Reply.