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As I have an Employees’ Provident Fund (EPF) account, I have stopped contributing to Public Provident Fund (except to maintain it at 1,000 per year). Should I contribute to both EPF as well as PPF so that I don’t miss the Section 80C deduction in case my EPF becomes taxable?

—Name withheld on request

These are two different aspects. An employee’s contribution to provident fund (PF) is considered as part of Section 80C of the Income Tax Act. And this has got no relevance to the fact of whether the EPF is taxable or not. And the contribution to PPF is also considered for the purpose of Section 80C deduction.

The total contribution of PF and PPF is capped at 1.5 lakh for deduction under Section 80C. Your contribution to PPF can be considered both for the purpose of tax saving under Section 80C as well as a good investment avenue.

You need to evaluate your overall investment portfolio to determine the asset allocation and accordingly decide your contribution to PPF.

I have two different provident fund passbooks under one Universal Account Number (UAN). Will the interest on the previous passbook become taxable since I have switched to a different company? Also, am I missing the chance to earn more compounded interest since I haven’t merged both accounts?

—Name withheld on request

You need to merge the two PF accounts. The advantage of having a UAN is that you can log in to the Employees Provident Fund Organisation website and consolidate the two accounts together, provided your KYC (know our customer) and Aadhaar details are updated.

You can also ask your current employer to get the consolidation done.

Surya Bhatia is managing partner of Asset Managers.

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