PF Final settlement shown in Salary Form 16 FY 26-27

• Form 16 Correctness: It is incorrect for the employer to include the SPF final settlement in the Gross Salary of Form 16, as it is completely tax-exempt.

• How to Fix the ITR-2 Error: Keep the Gross Salary as per Form 16 to match the AIS, but claim the exemption within the Salary Schedule using Section 10(11) (instead of Section 10(12)), which is the correct provision for government employees.

• Prevention: Submit formal feedback on the AIS portal clarifying that the amount represents an exempt statutory fund settlement to prevent any automatic mismatch notices.

PF final settlement for a state/central government employee is tax-free under SECTION 10(12). Form 16 Part B showing it under other Section 10 exemptions is correct.

The right way to file in ITR-2:

- Do NOT include PF settlement in the Salary schedule. Report only the monthly salary from Form 16 Part A.

- Report PF settlement in Schedule EI (Exempt Income) > Any Other > select Section 10(12). The utility errors disappear when you stop adding it to salary.

For the AIS mismatch: go to AIS > Submit Feedback > mark the PF amount as Income is not taxable (exempt under Section 10). AIS gets updated and the mismatch resolves without any revision to the return.

STCG and LTCG go in Schedule CG separately and are not affected by this.

For detailed EPF/PF withdrawal tax treatment and ITR reporting steps, see this [EPF withdrawal and ITR reporting guide](https://taxgarden.in/blog/epf-pf-withdrawal-tax-rules-india-ay-2026-27).

Thanks Sir