The Different Types of EPF You Did Not Know About

by Amit Kumar Digital Marketer & Tech Reviewer

Employee salary is not just about the earnings, it is about the deductions as well. We all know about the primary contributions that employees make under certain government schemes or fund programs. Employees’ Provident Fund is one of the most popular regimes that employees know of and actively participate in. Now, is it just a random share of the money that employees unknowingly or unwillingly make or are they really aware of the details of this scheme? Since almost every one in four working professionals contributes towards EPF, it is imperative to have an in-depth understanding of the same.

So, let us talk about the four main types into which the Employees’ Provident Fund is categorized and understand the tax applicability on each one of them:


Statutory Provident Fund

Abbreviated as SPF and also known as Government Provident Fund, this one was set up under the provisions of the Provident Funds Act, 1952. It is applicable to employees working with government and semi-government bodies, local authorities, railways department and educational establishments. The contributions made by the employee towards this fund can be claimed as tax deductions under section 80C. Some facts about this type of provident fund when you are making an online pf withdrawal are:

  • The amount of money contributed by the employer as SPF is exempted from income tax
  • If you withdraw the SPF at the time of retirement, it will be exempted from tax
  • The interest amount credit over the SPF is not counted as income and thus, is free from income tax
  • When an employee terminates the PF account, the final amount withdrawn by him is also tax-free


Recognized Provident Fund

This is the most predominant kind of Employees’ Provident Fund and most of the employees contribute to this scheme only. RPF is maintained by organizations or business establishments that have an employee base of 20 or more. If a company employs less than this number, it becomes optional for both the entities if they wish to opt for RPF or not. Let us focus on what else you need to know about these funds:

  • All RPF schemes should be approved by the Commissioner of Income Tax (CIT)
  • Employers can either create an EPF trust themselves or get employees registered under the government scheme set up by the PF Commissioner
  • If the employee’s contribution exceeds 12% then it is treated as income and is taxable in the contribution year
  • The interest on PF up to 9% is non-taxable and above this limit is not tax-free, rather taxable as salary
  • If an employee works for more than 5 years in an organization then if the amount saved from PF is withdrawn on retirement, it would be exempt from tax


Public Provident Fund

If we talk about the PPF, it is not restricted to only the working professionals. Anyone from the public, employed or unemployed can opt for making contributions towards Provident Fund. Even the common man who does not know how to withdraw PF online can apply for it. Yes, it is that easy nowadays! Further description of the Public Provident Fund is discussed in the points mentioned below:

  • The individual registered under PPF has to contribute a minimum amount of INR 500 per annum and a maximum of INR 1.5 lakhs per annum and this share is collectively repayable after 15 years of initiation
  • PPF can benefit the ones who do not have another option of a good pension scheme
  • This kind of EPF applies no taxes whether it is salary or the interest and it also comes with tax benefits under section 80C


Unrecognized Provident Fund

Broadly speaking, UPF is slightly different because it is a subdivision of the EPF which is not recognized by the Commissioner of Income Tax (CIT). To know more details about this category, read below:

  • In the year of contribution, the employer’s share is tax-free because it is not treated as income in the year of investment 
  • Under section 80C, employees’ contributions are not applicable for tax deductions
  • In the year of accrual, interest earned is not perceived as income of the employee in the credit year and thus it is not taxable
  • Tax is applicable at the time of retirement on “salary income” which is actually the employer’s contributions and interest on it 
  • On the other hand, an employee's contribution is non-taxable and the interest on employee’s contribution is charged under the income from other sources

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About Amit Kumar Innovator   Digital Marketer & Tech Reviewer

10 connections, 2 recommendations, 51 honor points.
Joined APSense since, December 16th, 2019, From Delhi, India.

Created on Mar 2nd 2020 02:39. Viewed 633 times.


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