💼 What is PF?
Employee Provident Fund (EPF) is a retirement benefits scheme regulated by the Employees’ Provident Fund Organization (EPFO). It requires both employees and employers to contribute a portion of the employee’s basic salary toward a long-term savings fund, which earns interest and can be withdrawn upon retirement or under specific conditions.
Key Points about PF
- Mandatory for organizations with 10+ employees under the EPF Act.
- Provides financial security post-retirement.
- Every employee is allotted a Universal Account Number (UAN), which remains the same throughout their career.
Bifurcation of Employee and Employer Contribution
| Particulars | Employee | Employer |
|---|---|---|
| EPF | 12% | 3.67% |
| EPS | 0% | 8.33% |
Complete Withdrawal of PF
- PF can be withdrawn upon retirement.
Partial Withdrawal (For Specific Purposes)
- Purchase/Construction/Renovation of house/flat
- Repayment of loan
- Medical treatment of self or family
- Marriage of self/daughter/son/brother/sister
- Post-matric education of children
- Before retirement (after reaching age 54)
- Special cases like closure of company, dismissal or legal challenge
Types of PF and Their Taxability
| Particulars | Recognized PF | Unrecognized PF | Statutory PF | Public PF |
|---|---|---|---|---|
| Employer’s Contribution | Taxable beyond 12% of salary | Not taxable at contribution | Fully exempt | Not Applicable |
| Employee’s Contribution | Deductible u/s 80C (Old Regime) | Not deductible | Deductible u/s 80C (Old Regime) | Deductible u/s 80C (Old Regime) |
| Interest on Employer’s Contribution | Taxable beyond 9.5% p.a. | Not taxable at credit | Fully exempt | N.A. |
| Interest on Employee’s Contribution | Taxable beyond 9.5% p.a. | Not taxable at credit | Exempt up to limit | Fully exempt |
| Withdrawal on Retirement | Exempt u/s 10(12) (See Note 2) | Partially taxable (see explanation) | Exempt u/s 10(11) | Fully exempt u/s 10(11) |
Note 1: Taxability of Interest Amount
- Before April 2021: Entire interest was exempt.
- After April 2021: Exemption only if employee’s annual contribution is ≤ ₹2.5 lakh.
- Where no employer contribution: Exemption limit is ₹5 lakh.
Note 2: Conditions for Exemption of RPF Withdrawal
- Continuous service of 5 years or more
- Termination due to illness, business closure, or unavoidable reasons
- Transfer of PF amount to another Recognized PF
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