Introduction to PROVIDENT FUND: It is a beneficial scheme which is being received after the retirement of an employee’s from his/her job, after completing, a specific deadlines describe under the company’s policies. The fund is being raised through certain sum of money deducted from employees salary at the time of joining as well as company also contribute for it. The sum is being invested in certain securities and the interest earned through it is being credited to the employee’s account.
On the contrary, in case, if the employee died then the sum of money will be received by his legal heirs. Thus, Under Income Tax Act, 1961 gives certain deductions on savings.
a. Statutory Provident Fund (SPF): It is applied to the Government employee’s, Railways, Semi-Government institution, local bodies, universities and all the respective recognized educational institutions. It is governed by Provident Fund Act 1925.
b. Recognized Provident Fund (RPF): It is governed by Part A of Schedule IV to the Income-tax Act. It is recognized by the commissioner of Income-tax for the purpose of Income-tax.
c. Unrecognized Provident Fund (URPF): This fund is not recognized by the Commissioner of Income-tax.
d. Public Provident Fund (PPF): It is operated under the Public Provident Fund Act, 1968. The benefit of this fund can be enjoyed by both self employed as well as by the employee. The person can deposit for his/her own perspective as well as on his behalf of a minor of whom tend to be guardian.
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In order to get deduction, a person should contribute a minimum sum of 500 INR a year, and a maximum amuount of 70,000 INR as per PPF rules under Section 80C. He/She can deposit in Installment basis i.e multiples of 500 INR , and earned interest of 8%. The sum deposit in any of the offices of SBI or its subsidiaries, Specified branches of Nationalized banks or Head Offices.