PF AMOUNT TAXABLE

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If a psu employee resigns after 25 years, is the PF and gratuity amount that he receives taxable?
Replies (2)

(i) In case of employees of Central & State Govt. Local Authority, Defence Services and Corporation established under Central or State Acts, the entire commuted value of pension is exempt.

(ii) In case of any other employee, if the employee receives gratuity, the commuted value of 1/3 of the pension is exempt, otherwise, the commuted value of 1/2 of the pension is exempt.

(iii) Any payment received from a Provident Fund, (i.e. to which the Provident Fund Act, 1925 applies) is exempt. Any payment from any other provident fund notified by the Central Govt. is also exempt.

1. Whatever the amount received at the time of retirement or resignation of an employee will be exempt if he is a central or state govt employee 
2. However, in your case, employee working in PSU will not be considered as a government employee and the amount received at the time of retirement will be subject to tax with some exemptions. 
3. Some of the major amounts received at the time of retirement include Gratuity (Sec 10(10)(ii)), Leave encashment (Sec 10(10AA)(ii)) and PF ( Sec 10(10A)(ii)). Refer the above provision for computation of exemption amount. 
Please correct me if the above solution has an alternative view. 


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