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Addition of PF (Both the contribution) to arive total income

08 March 2011

In calculation of total / gross income, whether we have to add employer contribution of PF. Again whether we can deduct the employer contribution also under deduction (Within the ONE LAKH limit) or not?

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10 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 08 March 2011

you can deduct it under 80 C limit.

AVIJIT (CA FINALIST) (370 Points)
Replied 08 March 2011

Yes. The amt will be added while calculating your Salary income and therefore your Gross total income but you will also get deduction under Sec 80C upto Rs.1Lakh

S Gopal (audit) (44 Points)
Replied 08 March 2011

Employer contribution towards PF will not part of employee salary. Only employee contribution will be included in Gross salary and the same can be shown as deductions u/s 80C .

AVIJIT (CA FINALIST) (370 Points)
Replied 08 March 2011

The employee contribution is already added in Total Salary so no need to add it again.

1 Like

Rahul Agarwal (Chartered Accountant) (213 Points)
Replied 09 March 2011

Hi Everyone,

Regarding Employee contribution: The same will not be included in salary as it is already included. It will be allowed as deduction under section 80C (upto Rs. 100,000)

Regarding Employers' contribution: When the contribution is made towards recognised Provident Fund, taxable amount is such contribution which exceeds 12% of salary of the employee. Salary = Basic + Da (forming part of retirement benefits) + commission based on fixed percentage of turnover.

Similarly, that part of interest on employers' contribution is taxable which exceeds 8.5% p.a. w.e.f 1.9.2010. Before it was 9.5% p.a.

Hope this helps.

Regards,

Rahul Agarwal

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Ritesh Jain (CA, CS in Job) (675 Points)
Replied 09 March 2011

As per section 17 of IT act under perks you can find that it includes:

(v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund ⁸⁷[or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an annuity;

So, any contribution other than recognized /approved PF fund will be taxable and any contribution in excess of 12%.

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 09 March 2011

As "employer contribution" is not taxable so deduction of 80C doesnot comes into picture.

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 09 March 2011

Particulars	Statutory Provident Fund	Recognized Provident Fund	Unrecognized Provident Fund	Public Provident Fund
Employer Contribution	Exempt	Taxable Above12% of Salary	Exempt	N.A
Interest Credited to Provident Fund	Exempt	Taxable above9.5%	Exempt	Exempt
Employee contribution (Deduction U/s80c)	Available	Available	Not Available	Available
Maturity Benefit	Exempt	Exempt subject to condition	Note	Exempt