Different Types of Provident Funds

There are different types of provident fund (PF) which are used by individual for investment and saving purpose and each is having different tax treatment.

But Broadly Provident fund can be categories into four categories

1. Statutory Provident Fund(SPF)

2. Recognized Provident Fund (RPF)

3. Unrecognized Provident Fund(URPF)

4. Public provident fund(PPF)

Explanation

1. SPF is specially prepared for investment in provident fund account managed by the government for govt. employees.

2. Recognized provident fund is a scheme to which PF Act1952 applies. According to this Act, a person who appoints 20 or more employees then he is liable to register himself under the PF act.

1. The concern may join the govt. scheme set up by the PF Commissioner.

2. Can be managed by employer himself by creating the trust for the provident fund and get the approval of CIT. This type of structure is generally created by the very large organizations.

3. URPF is a scheme started by the employer & is not approved by the CIT.

4. Under PPF any member from public whether is in employment or not may contribute to this fund. The minimum contribution is Rs. 500 p.a. & maximum 70000Rs. p.a., amount is repayable after 15 years with interest@8% p.a. From the income tax perspective best is statutory provident fund means PF which is compulsory in nature of govt. employees and Employer contribution is tax free and employee can claim tax deduction under section 80C of the income tax subject to maximum limit of Rs 100,000/-

Statutory provident fund |

Employers contribution | Tax free-exempt |

Employee contribution | Deduction u/s 80C |

Interest on contribution | Tax free |

Effect at time of the receipt | No effect |

Recognize provident fund |

Employers contribution | Exempt upto 12%

 In excess of 12% taxable in the year of contribution |

Employee contribution | Deduction u/s 80C |

Interest on contribution | Exempt upto 9.5%...