Tax on Provident Fund Received on Resignation

 Exemption available under section 10(12) of the Income Tax Act– Provisions of section 10(12) exempt the accumulated balance, due and payable, to the employee participating in the Recognized Provident Fund.

The exemption is available to the extent covered in Rule 8 of Part A of the Fourth Schedule.

As per rule 8 of part A of the fourth schedule, accumulated balance payable to an employee covered in a Recognized Provident Fund shall be exempted only under any of the following cases- 1.The employee has provided continuous service, with his employer, for a period of 5 years or more.

2.In case the service of the employee is terminated before the period of 5 years, the reason for termination should be any of the following- Termination of service due to Employee’s ill-health; or Termination of service by the contraction; or Termination of service due to discontinuation of employer’s business; or Termination of service due to any reason which is beyond the control of the employee.

3.In case of cessation of employment, the employee takes employment with any other employer, then, the accumulated balance (due and payable) to the employee is transferred to his individual account in any Recognized Provident Fund managed by such other employer

Conclusion:S

BI contribution and interest thereon is taxable as salary Income

Interest on Employee contribution as under Income from other  sources.