The document discusses provident funds in India, including statutory provident funds for government employees, recognized provident funds for large private organizations, unrecognized funds, and public provident funds. It notes that employer contributions are fully exempt for statutory and public funds. Employee contributions are deductible under section 80C for all funds. Interest is fully exempt for statutory, recognized up to 9.5%, and public funds, but taxable for unrecognized funds. At retirement, payouts are fully exempt for all except unrecognized funds, which are fully taxable. It also provides an example calculation for taxable recognized provident fund of an employee.

1. Income Tax Law and Practice -I
Provident Fund

2. Meaning
The provident fund is saving scheme set up
by government for employees for future
security. It is saving fund in which employer
and employee contributes to the fund in a
fixed percentages. The fund gets credited
interest to employees account.

3. Types
• Statutory provident Fund
This fund is applicable to Govt and semi govt employees
• Recognized Provident Fund
This fund is approved by income tax department. It is applicable to
the organizations having more than 20 employees
• Unrecognized Provident Fund
It is provident fund which is not be approved by the commissioner
income tax.
• Public Provident Fund
This fund is set up for salaried employees.

4. Treatment of Tax
Particulars
Statutory
Provident Fund
Recognized
Provident Fund
Unrecognised
Provident
Fund
Public
Provident
Fund
Employers contribution Fully Exempt
Exempt up to
12% of Salary
Fully Exempt -
Employee’s Contribution Ded u/s 80C Ded u/s 80C Not Available Ded u/s 80C
Interest Credited to PF a.c Fully Exempt
Taxable if
Interest
exceeds 9.5%
Fully Exempt Fully Exempt
Payment received at the
time of retirement
Fully Exempt Fully Exempt Fully Taxable Fully Exempt

5. Mr. Prabhakar is an employee in a
company in Bangalore. His
1. Basic salary is Rs. 8000 p.m,
2. Dearness allowance Rs. 2000 p.m
(Rs. 1000 p.m enters into
retirement benefits)
3. Commission on Turnover Rs. 2000
4. Company has contributed to his
recognized provident fund at 14%
of his salary and he contributed
equal amount
5. The interest above fund is Rs.
14000 at the rate of 14% p.a
Compute taxable RPF
Solution: Calculation of Taxable RPF
14% of basic Salary
(1,10,000 X 14/100) = 15,400
Less: Exempt at 12%
(1,10,000 X 12/100) = 13,200
Taxable RPF = 2,200
Calculation of Taxable interest on RPF
Interest at 14% = 14,000
Less: Exempt @ 9.5%
(14,000 X 9.5/14) = 9,500
Taxable interest on RPF = 4,500
(Basic= basic + DA Retirement + Commission on turnover
96000+ 12000+ 2000= 1,10,000)