|Particulars||SPF (Statutory Provident Fund)||RPF ( Recognised Provident Fund)||URPF (Unrecognised Provident Fund)||PPF ( Public Provident Fund)|
|1. Employee’s/ assessees’ contribution||Deduction u/s 80C is available from gross total income subject to the limit specified therein||Deduction u/s 80C is available from gross total income subject to the limit specified therein||No deduction u/s 80C is available||Deduction u/s 80C is available from gross total income subject to the limit specified therein|
|2. Employer’s contribution||Fully exempt from tax||Exempt upto 12% of salary. Amount in excess of 12% is included in gross salary.||Not exempt but also not taxable every year. For taxability see point 4 below||Not applicable as there is only assessee’s own contribution|
|3. Interest on Provident Fund||Fully exempt from tax||Exempt u/s 10 upto 9.5% p.a. Interest credited in excess of 9.5% p.a. is included in gross salary.||Not exempt but also not taxable every year. For taxability see point 4 below||Fully exempt|
|4. Repayment of lump sum amount on retirement/ resignation/ termination||Fully exempt u/s 10(11)||Exempt subject to certain conditions. See Note 2 below.||Accumulated employee’s contribution is not taxable Accumulated employer’s contribution + interest on employer’s contribution (till date) is taxable as profit in lieu of salary. Interest on employees contribution (till date) is taxable as income from other sources||Fully exempt. u/s 10(11)|
1. Employer’s contribution and interest on provident fund in the case of unrecognized provident fund are not taxable in the year of contribution or credit of interest. However when the lump sum amount is received by the employee then it becomes taxable.
2. The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be exempt in the following cases:
(i) If the employee has rendered continuous service with his employer for a period of 5 years or more, or
(ii) If, though he has not rendered such continuous service of 5 years, the service has been terminated
(a) by reason of such employee’s ill health or
(b) by the contraction or discontinuance of the employer’s business or
(c) or other cause beyond the control of the employee, or
(iii) If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent the accumulated balance due and becoming payable to him is transferred to his individual account in any recognised fund maintained by such other employer.
However in a situation mentioned under clause (iii) above for calculating period of service for clause (i) and (ii) above the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall also be included.
3. If the accumulated balance due to an employee participating in a recognised provident fund is paid to him otherwise than in the circumstances referred to above, as for instance, in cases where the employee voluntarily resigns from the post before the completion of 5 years-service with the employer, the amount paid to the employee is brought within the ambit of taxation. In such cases, the employee is required to pay, in addition to normal tax payable by him, an amount equal to the difference between the aggregate tax which would have been payable by him if certain tax concession allowed to the employees participating in recognised provident fund had not been allowed to the employee in the years in which he made contribution to the fund and the aggregate tax actually paid by him for these years.
In other words tax relief or deduction allowed to the assessee shall be withdrawn.
Further, the total employer’s contribution plus interest thereon, which was not taxed earlier, shall be taxable as profit in lieu of salary. He can however, claim relief in this regard under section 89. Further, interest on employee’s contribution is taxable as income from other sources.
4. Salary, for the purpose of provident fund includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. As per the Supreme Court decision, commission allowed as a fixed percentage of the turnover achieved by the employee, is also included in the basic salary.
Transferred balance of Unrecognised Provident Fund (URPF) when it is converted into Recognised Provident Fund (RPF) :
As discussed above, payment from URPF is taxable to the extent of employer’s contribution and interest thereon. On the other hand, payment from RPF is exempt, subject to certain conditions. As such, if URPF is later on converted into RPF, out of the total amount standing to the credit of the employee in the fund, the employee may opt to transfer the whole or a part of the accumulated balance to the recognised provident fund. That part of the accumulated balance which is not transferred and which relates to the employer’s contribution and interest thereon is taxable as profits in lieu of salary.
That part of the sum transferred from URPF to RPF is taxable as under:
(i) It will be assumed, as if, such URPF was recognised right from the beginning.
(ii) As URPF will be treated as RPF right from the beginning, contribution by the employer every year in excess of 10% of the salary of employee upto assessment year 1997-98 and 12% from assessment year 1998-99 plus interest credited to the provident fund every year in excess of 9.5% shall be aggregated till the date of conversion of the URPF to RPF. This aggregate will be included in the Gross Salary in the previous year in which the conversion took place provided the whole accumulated balance is transferred to recognised provident fund account.
Where part of the accumulated balance is transferred to recognised provident fund, then proportionate amount of the aggregate amount thus computed shall be taxable.
Further the part of the accumulated balance which is not transferred to the recognised provident fund shall also be taxable to the extent it relates to employers contribution and interest thereon and the interest on employees contribution included in such accumulated balance will be taxable under the head income from other source.
In other words, if the contribution by the employer to URPF in the past years was 10% or less than 10% or 12% of the salary, as the case may be, and the interest credited to URPF was 9.5% per annum or less than 9.5% per annum there will be no Transferred Balance. Hence nothing will be taxable.