How much amount is deducted (at source maybe) as a contribution towards provident fund??



As you’ll would have guessed, I really don’t know a lot about salary deductions and contributions. I will really appreciate if someone can enlighten with the way the salary works in India? what sections/heading are people paid under? Which of those fields are taxable? How much gets deducted at source and for what reason? What exactly is a provident fund or public provident fund? How much tax is deducted under professional tax?

:o)

2 Replies to “How much amount is deducted (at source maybe) as a contribution towards provident fund??”

  1. You have asked tens of questions in a single question. Better contact HR of your company for detailed answer.

    On EPF what I can share with you is that if EPF is applicable to your employer and you as well, then employer shall deduct 12% of your basic and along with equaivalent from his side shall be deposited in a EPF account. EPF/PF is a social security scheme for employees. Conditions apply.

    This is a very basic answer for your understanding (you can say EPF for dummies)

    🙂

    Deepak Bholusaria
    Chartered Accountant


  2. 1. Generally salaried persons contribute into the Employee Provident Fund (EPF) to the extent of 12% of the basic salary as the same qualifies for deduction under section 80C of the Income-tax Act, 1961. It requires mention here that such fund should have been set up as per Provident Funds Act, 1925.
    More interestingly the employer contributes the same amount as you do and tax-free annual return of 9.5% p.a. accrues on both the contributions.
    It is advisable to go for it if you want to lock your funds for long-term. (read below to learn more on EPF)

    The new version of Section 80C allows you to invest up Rs.1,00,000 in any of the schemes below (including PF) and it will not attract any tax: (Note: this list is illustrative only)

    -Public Provident Fund (PPF) (with an annual tax-free return of 8.0%, read below to learn more on PPF)
    -Equity Linked Savings Scheme (ELSS) – Mutual Funds (returns depends upon scheme to scheme, could be as high as 60%)
    -National Savings Certificates (NSC) (fixed returns depending upon the terms of the certificate)
    -Kisan Vikas Patra (KVP) (fixed returns depending upon the terms of the certificate)
    -Life Insurance (returns depend upon scheme to scheme)

    2. Your second query was with respect to (wrt) the sections/headings people are paid under in India, let me tell you that it purely depends upon the employer. Kindly contact your HR-head. Generally, the heads are as under:
    Basic Salary
    Conveyance
    House Rent Allowance
    Food Allowance
    Contribution to PF (Optional)
    Special Allowance
    Medical Allowance etc

    3. It is difficult to answer which of the heads are taxable. We can prepare your tax computation with minimum tax liability possible once you provide us with your salary break-up.

    4. Withholding tax (also TDS) to the extent of the tax anticipated will be deducted at source, for this purpose you have to make a declaration as for your investments during the relevant financial year. For eg if the tax anticipated comes to Rs.15,000 p.a. then Rs.1,250 will be deducted from your salary per month.
    Other deductions would be as you said profession tax and contribution to EPF, if you opt for it.

    5. EPF is a social security programme for the employees run by the Central Government as per the provisions of Provident Funds Act, 1925 and useful after their retirement. Employer and employee both contribute to the same. Full amount in EPF can be withdrawan by the member only:
    -if attained 55 years of age;
    -at the time of termination of service;
    -if retired on account of permanent/total disablement;
    -if shifted abroad permanemtly or
    -on account of mass/individual retrenchment

    However, PPF is a long-term savings plan with attractive tax benefits. It is suitable for those who are not looking for short-term liquidity or regular income. Normal maturity period is 15 years from the close of the financial year in which the initial subscription was made. The Maturity values for PPF account would depend on what you invest each year.
    It is open for all individuals, to subscribe to this you have to visit any of the scheduled banks (for eg. State Bank of India, Bank of India etc.) in India.

    6. Your sixth query was wrt the profession tax, to help you in the same we need to know the state your place of employment in as the the said tax is a state subject and varies per state.

    Should you require any more assitance wrt tax-planning (how to save tax) in India, kindly eMail us at [email protected] or drop in at http://www.ThinkSynergy.co.in. We ‘ll be more than glad to assist you.

    Warm Regards,

    per PulkitGoyal
    ThinkSynergy





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