Taxability of Provident Fund -Recognized, Unrecognized & StatutoryPosted InIncome Tax|Articles,Featured|25 Comments Tax treatment of Recognized ProvidentFUND(RPF), Unrecognized Provident Fund (URPF), Statutory Provident Fund (SPF)Section 10(11) and 10(12) of the ActDEALwith 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 ProvidentFUND(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 shallINVEST FUNDSin 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 ofINCOME 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. 100,000 per annum. The contribution made along with interest earned is repayable after 15 years, unless extended.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 resignationSummarized table showing tax treatment of provident fundsFUNDDuring Continuity of JobUpon Retiremen

Employees ContributionEmployers ContributionInterest on Provident FundRepayment of sum on retirement, resignation orTERMINATION

RPFDeduction under Section 80C is available.Exempt upto 12% of Salary. Thus Contribution made by employer exceeding 12% shall be added to employees salary Income.Exempt upto 9.5%. InterestEXCEEDING9.5% shall be added to employees Salary Income.Nothing is taxable subject to following conditions:1. Employee left the job after five years of service OR2. WherePERIODof service less than 5 years, the termination is due to ill health, discontinuance of business of employer. OR3. 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:1. The amount not taxed earlier shall be taxed in theSAMEmanner as URPF, given below.2. AnyTAXconcession (e.g. 80C) availed by assesses for contribution to RPF shall now be withdrawn.

URPFNo deduction underSECTION80C availableAny amount of contribution is not taxableNot taxableSum received on retirement/TERMINATIONcomprise of following:Employers Contribution and interest there on: Taxable as Salary Income.Employees own Contribution : It is not taxable.Interest on employees contribution: Taxable as income from other sources.

SPFDeduction under Section 80C is available.Fully ExemptFully ExemptFully Exempt

PPFAssessee / Employee can make contribution to PPF, No concept of Employers Contribution. Deduction under section 80C available on contribution made.Amount received (including interest) is Fully Exempt.