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Tax On PF Employee And Employer Contribution

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  • Tax On PF Employee And Employer Contribution

    Dear all,
    Please clarify the below point. In my CTC, around Rs.40320 is employer contribution to PF and Rs.40320 is employee contribution to PF.
    My doubt is, is that total amount Rs.80640 will be considered as non-taxable income or only the employee contribution only the non-taxable income. Our accountant says, as both employee and employer contribution is included as part of CTC, only the employee contribution considered as non-taxable income and for the remaining amount i need to pay the tax.
    Please clarify the above point.

  • #2
    Dear Friend,

    These days Majority companies follows CTC Concept in this concept they are including P.F Employer Contribution also. Your accountant is correct only the employee contribution will be considered as a Tax saving while calculating tax liability of the particular employee.

    In your case 40,320 will be considered as a Tax savings. About Tax pay you need not to pay for the remaining P.F amount. I am conforming you that there is no Tax on P.F

    either withdrawal or payment as of now. may be you have to pay tax if your total Income exceeds the Tax limit I mean current year Tax Limit is Rs. 1,60,000/- This amount Rs. 1, 60,000 will be arise after all your deduction Like HRA, Conveyance, Medical Allowance, and your savings (PPF, P.F, NSC, LIC, Mutal funds etc/ Limited Rs. 1, 00,000).

    After all these deductions still your Total income exceeds Tax limit you have to pay tax according to Income Tax Slabs.

    If you want more clarity you ask your accountant he clear all your doubts.



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