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Provident Fund

Circumstances Statutory Provident Fund Recognised Provident Fund Unrecognised Provident Fund
Employer’s contribution to provident fund Exempt from tax Contribution in excess of 12% of salary is taxable Exempt from tax
Employee Contribution Deduction under section is available Deduction under section 80 C is available Deduction under section 80C is not available
Interest credited to provident fund Exempt from tax Interest in excess of 9.5% is taxable Exempt from tax
Lump sum payment at the time of retirement or termination of services Exempt from tax Exempt in specified conditions Specified amount is taxable

Specified Conditions

  1. If the employee has rendered continue service with the employer for a period of 5 years or more. In calculating time period, service rendered with the previous employer shall be included only if the previous employer also maintained recognised provident fund and the provident fund balance of the employee was transferred by him to current employer
  2. If the employee has been terminated because of certain reasons beyond his control (ill health of employee, discontinuation of business by employer, completion of project etc)

Specified Amount

  1. Payment received in respect of employer’s contribution and interest thereon shall be taxable under the head “Salaries”
  2. Payment received in respect of interest on employee’s contribution shall be taxable under the head “Income from Other Sources”
  3. Payment received in respect of employee’s contribution is exempt from tax.

Additional Point

  1. Salary = Basic Salary + Dearness Allowance (if forming part of retirement benefit) + Commission (if determined at a fixed percentage of turnover achieved by employee)

 

Approved Superannuation Fund

Contribution of Employer’s         Taxable in excess of Rs 1,00,000 per annum

Contribution of Employee’s        Deduction under section 80C is available

Interest                                                Exempt from tax

Lump sum payment shall be exempt from tax in the following conditions

  1. Payment made to legal heirs on the death of the beneficiary.
  2. Payment made to the employee in lieu or in commutation on his retirement at or after the specified age or on his becoming incapacitated prior to such retirement.
  3. Payment made by way of refund of contribution on the death of the beneficiary

Payment made by the way of refund of contribution if that amount includes any contribution made prior to April 1, 1962. Only that amount is exempted to tax which is contributed prior to April 1, 1962.

 

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