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Rediff.com  » Getahead » Understanding provident funds

Understanding provident funds

By Relax With Tax
December 12, 2005 13:14 IST
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Imagewould like some information regarding my father's pension. He gets a pension of Rs 73,000 per annum.

Should I mention it on the income tax form or should after standard deduction? 

- Rshmit Somal

You would need to mention the pension income after standard deduction in the return form.

However, standard deduction has been done away with from the current year onwards and, henceforth, there would be no question of availing standard deduction.

I am aware that there are two types of provident funds. Can you tell me what they are? Also, can you please tell me if any interest rates apply if you withdraw the whole money from PF?

- Jyoti

Actually, there are three types of provident funds: Statutory Fund, Recognised Provident Fund and Unrecognised Fund.

Statutory PF is set up under the provisions of the PF Act, 1925. This fund is maintained by government and semi-government organisations, local authorities, railways, universities and recognised educational institutions.

The Employee's Provident Fund & Miscellaneous Provisions Act, 1952, applies to Recognised PF.

Unrecognised PF is a fund that is not recognised by the Commissioner of Income Tax.

Generally, EPF schemes floated by employers are recognised provident funds.

The Provident Fund facility is generally provided by an employer to his employee. A percentage of the salary is deducted as Provident Fund and, generally, the employer contributes as much as the employee contributes into the fund.

Also one can invest in the Public Provident Fund, which is established by the Central Government for the benefit of general public to mobilise personal savings. The PPF is a government run fund where the entire contribution is voluntarily made by the individual himself. The maximum that can be invested is Rs 70,000 per annum and it is for a period of 15 years.

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Illustration: Dominic Xavier

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