Tax exemption on pf contribution

PF contribution is exempt upto 12% of contribution.

Starting from 1 April, the interest on employee contributions to provident fund of over ₹2.5 lakh per annum will be taxed, finance minister Nirmala Sitharaman announced in the Union Budget 2021. Up to ₹2.5 lakh has been kept as the deposit limit for which interest is tax exempt, finance minister said. In Finance Bill 2021, the government has introduced an amendment to the rule. The finance ministry increased the deposit threshold limit to ₹5 lakh per annum in provident fund for which interest would continue to be tax-exempt, if there is no employer contribution.

At least 12% of an employee's basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%.