my wife retired from INDIAN OVERSEAS BANK DELHI DURING 2014. the bank has deducted tax on gross arrears instead of net arrears after deducting p.f deduction. the bank refused to give exemption saying one gets rebate u/s section 80c for p.f . the question is,when salary is computed, whether the gross salary is taxable or the net salary after deduction of provident fund contribution?
Section 10(11) and 10(12) of the Act deal with exemption on payments from provident funds, while section 80C of the act deals with allowance of deductions on contributions to provident funds. The following are the types of provident funds. 1. Recognized Provident Fund (RPF): This scheme is applicable to an organization which employs 20 or more employees. An organization can also voluntarily opt for this scheme. All RPF schemes must be approved by The Commissioner of Income Tax. Here the company can either opt for government approved scheme or the employer and employees can together start a PF scheme by forming a Trust. The Trust so created shall invest funds in specified manner. The income of the trust shall also be exempt from income taxes. 2. Unrecognized Provident Fund (URPF): Such schemes are those that are started by employer and employees in an establishment, but are not approved by The Commissioner of Income Tax. Since they are not recognized, URPF schemes have a different tax treatment as compared to RPFs. 3. Statutory Provident Fund (SPF): This Fund is mainly meant for Government/University/Educational Institutes (affiliated to university) employees. 4. Public Provident Fund (PPF): This is a scheme under Public Provident Fund Act 1968. In this scheme even self-employed persons can make a contribution. The minimum contribution is Rs. 500 per annum and the maximum contribution is Rs. 150,000 per annum. The contribution made along with interest earned is repayable after 15 years, unless extended. All about PPF and Income tax benefit
Sir, TDS should be deducted after taking exemption u/s 10 and deduction under chapter VI A of income tax act e.i. as after taking deduction of provident fund. As taxable salary is computed after taking all deductions and exemptions applicable hence TDS should be deducted on net salary i.e. after taking deduction of provident fund. Ex.- Suppose you have invested Rs.1.2 lakhs in P.F. categories that fall under Section 80C exemptions, and made another Rs.30,000 investment in categories falling under Section 80D. So, the resulting Rs.1.5 lakhs is exempted from taxes according to Chapter VI-A. Deducting this amount from the gross taxable income i.e.salary and deduct tax as per slab rate applicable.