PF exemptions to now align in full with EPFO rules

New Delhi: In a move aimed at enhancing ease of doing business and reducing litigations, the budget proposed to rationalise certain provisions for provident funds trusts, which were availing exemptions under the Schedule XI of the Income Tax Act, to fully align them with the exemptions applicable to the Employees’ Provident Fund Organisation (EPFO)The budget did away with the requirement for employer contribution to match employee contribution to PF and taxability of employer contribution in excess of 12% of wages.

This has been done keeping in mind that employer contributions in aggregate to PF, New Pension System (NPS) and Superannuation Fund in excess of ₹7.5 lakh per employee per annum are in any case taxable.

Further, for private provident fund trusts to obtain and retain income-tax recognition, the budget proposed to make it necessary for such trusts to obtain exemption under the Provident Fund Act. This is to ensure that such trusts comply with all regulations applicable under the Provident Fund Act, the budget clarified.

According to Saraswathi Kasturirangan, partner, Deloitte India, employer contribution to provident fund is specifically exempt from tax in the employees’ hands, irrespective of individuals following regular tax regime or the simplified regime.