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Ask Mint Money | If PF is accumulated for 5 years or more, it becomes tax-free

Ask Mint Money | If PF is accumulated for 5 years or more, it becomes tax-free
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First Published: Wed, Nov 23 2011. 09 31 PM IST

Updated: Wed, Nov 23 2011. 09 31 PM IST
I will withdraw my provident fund (PF) after working for six years in the same company. Will it be taxed?
—Shikha Naik
As per section 10(12), any payment received under rule 8 of Part A to the Fourth Schedule is exempt from tax in the hands of the employees. Rule 8 provides that any accumulated balance due and becoming payable to an employee who has rendered continuous service with his employer for a period of five years or more shall be excluded from computation of his total income. Accordingly, in your case, withdrawal from PF shall not be taxable.
The limit for Public Provident Fund (PPF) has now been increased to Rs 1 lakh. Can this entire amount be claimed under section 80(C)? Also, can I open a PPF account for my minor children and deposit money?
—Anand Sinha
Since the limit for PPF has been increased to Rs 1 lakh, the entire amount deposited in PPF shall be available as a deduction under section 80C subject to an upper limit of Rs 1 lakh. Further, the PPF account can be opened in the name of your minor child and you can claim deduction for the amount contributed to the account in the name of the child as well as subject to the limit of Rs 1 lakh. Please note that the date from which the limit will be increased to Rs 1 lakh is yet to be notified by the government.
I recently changed my job and my new salary is almost thrice the amount I used to get in my previous job. During investment declaration I had a few investments but now I plan to increase my investment proportionately to my salary hike. How will the tax be treated?
—Abhiroop
Even if you increase the investments proportionately, the maximum amount of deduction that can be claimed from the taxable income on account of investments shall be restricted to the following:
Deduction under section 80C: Deduction in respect of the amount paid towards life insurance premium, deferred annuity, contributions to PF, National Savings Certificates and subscription to certain equity shares or debentures, among others, in a fiscal year shall be available up to Rs 1 lakh.
Deduction under section 80D: Deduction is permissible under this in respect of health insurance premium paid (by any mode other than cash) up to Rs 15,000 (Rs 20,000 if the person insured is a senior citizen). The premium can be paid for self, spouse or dependant children. An additional deduction of Rs 15,000 (Rs 20,000 for senior citizens) shall be available in respect of premium paid for your parents.
Deduction under section 80CCF: Up to Rs 20,000 paid or deposited as subscription to notified long-term infrastructure bonds is available for deduction.
Nitin Baijal is director, BMR Advisors
Queries and views at
mintmoney@livemint.com
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First Published: Wed, Nov 23 2011. 09 31 PM IST
More Topics: Ask Mint Money | Nitin Baijal | PF | Tax | Employees |