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Employer contn to PF in Excess of 12% U/s 80C

CA Final Student


Hi 
As you know that Employer Contribution in excess of 12% of salary is included in Taxable salary.

Now can the Employee claim exemption U/s 80C towards contribution to PF to the extent of Excess, since he is paying tax on same (Means his income)?????

 
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Ya he can claim exemption under section 80c as deduction under P.F the total P.F contribution including the excess amount also , because all ready the excess amount is including in the taxable income under salary head , so the tatal contribution of P.F is deductable

 
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CA Final student


why does he need deduction when he is already paying tax on that income!!!!

 
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Dear Prakash,

Employer's Contribution to Provident Fund is exempt only to the extent of 12% of salary.The excess is treated as perks and the employee is suppose to pay tax on it.

 

Further,

The employee can claim deduction u/s 80C for his contribution to the fund without any restriction as in the case of employer's contribution.

The excess of employer's contribution which was taxed under the head " salary" is not further allowed as deduction.

 

Regards,

Fatema.

 
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CA Final and CS Final


Originally posted by : FATEMA

Dear Prakash,

Employer's Contribution to Provident Fund is exempt only to the extent of 12% of salary.The excess is treated as perks and the employee is suppose to pay tax on it.

 

Further,

The employee can claim deduction u/s 80C for his contribution to the fund without any restriction as in the case of employer's contribution.

The excess of employer's contribution which was taxed under the head " salary" is not further allowed as deduction.

 

Regards,

Fatema.

 Agreed with Fatema. One correction i want to make. RPF in excess of 12% is not a perk but it is taxable under Section 17(1). It means it is a part of salary and not perquisite.


Total thanks : 1 times

 
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AGREED WITH FATEMA.

PERQUISITES ARE ALSO PART OF SALARY. SALARY ALSO INCLUDES EXCESS OF 12% IN RPF.

HENCE NO NEED FOR CORRECTION OF ABOVE STATEMENT.

Salary is a different story. Tax is required to be paid on salary due from an employer whether paid or not, received in advance though not due and also on arrears of salary paid.

Salary includes wages, fees, commissions, perquisites, profites in lieu of, or, in respect of encashment of leave etc. It also includes the annual accrection to the employee's account recognized provident fund in excess of 12% of the salary of the employee, along with interest applicable, shall be included in the income of the employee.

Profits in lieu of salary includes amount received in lump sum or otherwise, prior to employment (temptation to switch jobs) or after cessation of employment (do not join a competitor or divulge sensitive information). It will not include interests on contributions or any sum received, including bonus, under keyman insurance.

Salary can be any of the following forms:

  • Wages;
  • Any annuity or pension;
  • Any gratuity;
  • Any fees/commissions, profits/perquisites in lieu of any salary or wages;
  • Any salary advance;
  • Any payment that employee receives for a period of leave not taken by him;
  • Any annual accreditation to provident fund balance at the credit of an employee
  • The total of all sums that are comprised in the transferred balance

 
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CA Final Student


Sorry for the delay

But he was paying to RPF out of the his income (Excess Contn) towards savings

Then what provision says he is not eligible to claim??

I thought the employer has to take this as savings nd deduct the TDS Accordingly 

 
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