Provident Fund (PF) or Employee Provident Fund (EPF) is a retirement benefit scheme that’s available to all salaried employees. This fund is maintained and overseen by the Employees Provident Fund Organisation of India (EPFO) and any company with over 20 employees is required by law to register with the EPFO. It is basically a savings platform that helps employees save a part of their salary every month that can be used by them upon retirement. Under this scheme, a certain contribution based on the basic salary and DA of the employee is deducted by the employer from his salary and gets invested in his PF or EPF account. An equal contribution is made by the employer to the PF account. Both the contributions are invested and interest is earned on the same. On retirement, the employee gets a lump sum amount including self and employer’s contribution with interest accumulated. Types: Let us see the different types of Provident Funds.

• Statutory Provident Fund: This is the provident fund, maintained by Government, Semi-Govt bodies, Railways, Universities, educational institutions affiliated to universities, Local Authorities etc.
• Recognised Provident Fund: Any business entity which employs 20 or more employees are under an obligation to join RPF. However, organisations which employ less than 20 employees can also join RPF if the employer and employees want to do so. Most of the employees of the organisation, generally contribute to this type of Provident Fund. This is one of the popular types of EPF.

The business entity can either join the Govt. scheme set up by the PF Commissioner or the employer himself can manage the scheme by creating a PF Trust. All Recognized Provident Fund Schemes must be approved by The Commissioner of Income Tax (CIT).

• Unrecognised Provident Fund: This type of Provident fund is not recognized by PF Commissioner or Commissioner of Income Tax. The employers and employees start these schemes on their own.
• Public Provident Fund: PPF is an excellent retirement planning / savings tool, for those who do not come under any pension scheme. Any individual from public, whether is in employment or not may contribute to this fund. The minimum contribution is ₹500 p.a. & maximum is ₹1.5 Lakhs p.a. The accumulated amount along with the interest earned can be withdrawn after a period of 15 years from the date of first deposit. The applicant also has the option of extending the scheme for another 5 years term at the end of 15 years.

Since, July 2017, the interest rate on PPF is 7.8% per annum.   Tax treatment:   Provident Funds are taxed as under:

Particulars	Statutory PF	Recognised PF	Unrecognised PF	Public PF
Employer’s Contribution	Not taxable	Contribution to 12% of salary is exempt, above that is added to salary income of the employee.	Not taxable	Not taxable
Employee’s Contribution	Section 80C Deduction	Section 80C Deduction	No Section 80C deduction	Section 80C Deduction
Interest on PF	Exempt	Any interest over and above 9.5% is added to Income from Salaries. Until 9.5% interest is exempt.	Not taxable	Exempt
Amount withdrawn at the time of retirement	Exempt	Exempt subject to certain conditions*.	Contribution from employer and interest on that is taxable under the head Income from Salaries; Contribution by an employee is not taxable, and employee’s contribution interest is taxable under the head Income from Other Sources.	Exempt

Conditions:

• Employee leaves the job after 5 years of employment; or
• Where the service period is less than 5 years, the reason for termination is discontinuance of employer’s business or ill health; or
• The balance in RPF is reassigned to RPF with the new employer on re-employment.

  Some Important points to note:

• If the withdrawal from a recognized PF happens after 5 years of continuous employment, it attracts no tax liability. Continuous employment is referred to when PF balance maintained with the old employer is transferred to the PF account of the new employer.
• The withdrawal does not attract any tax if an employee has been terminated because of certain reasons beyond his control, irrespective of the number of years of employment.
• In case, individual withdraw before 5 years, the amount becomes taxable in the same financial year.
• If the person had claimed benefits under Section 80C on own PF contribution, it will be taxed as salary. The interest earned on your own contribution will be taxed as ‘income from other sources’ and taxed according to the respective tax slabs.