Five smart things to know about tax treatment for recognised Provident Fund
October, 13th 2014
1. A recognised Employees' Provident Fund is a scheme approved by an income tax commissioner. It applies to organisations or factories with 20 or more employees.
2. The employer's contribution to a recognised EPF to the extent of 12% of the salary (basic salary + dearness allowance) is exempt from tax. The remaining contribution is added to the employee's income.
3. An employee can claim a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961, for his own contribution to the EPF.
4. Up to 9.5% of the interest credited to the recognised EPF is exempt from tax. The rest is added to the employee's income.
5. On retirement, the amount received from the recognised EPF is tax-free in the hands of the employee if he has completed five years of continuous service.