What is RPF in Income Tax?

Wondering about what is RPF full form in income tax? A Recognized Provident Fund (RPF) is a retirement benefits scheme in India that is recognized by the Commissioner of Income Tax under the Income Tax Act, 1961. It is a common type of provident fund available to salaried employees and offers several tax benefits. Scroll down to learn more.

What is RPF in Income Tax India?

RPF is applicable to employees of organizations that maintain provident funds approved by the Income Tax Department. Employers can set up RPFs to provide retirement benefits to their employees.

Contributions to the RPF are made by both the employer and the employee. Typically, both contribute a fixed percentage of the employee's salary (usually 12% each) to the fund.

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• Employee Contribution: Employee contributions to the RPF qualify for tax deduction under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh per financial year.

• Employer Contribution: Employer contributions up to 12% of the employee’s salary are exempt from tax. Contributions exceeding this limit are taxable in the hands of the employee.

• Interest: Interest earned on the RPF is tax-free, provided the interest rate does not exceed the prescribed rate (currently 9.5% per annum). Any excess interest is taxable as salary income.

• Withdrawal: The accumulated balance withdrawn from the RPF is tax-free if the employee has completed at least five years of continuous service. If the service period is less than five years, the withdrawal is taxable unless the termination is due to ill-health, discontinuation of the employer's business, or any other reason beyond the employee's control.

RPF is portable across jobs, allowing employees to transfer their provident fund balance from one employer to another without losing the accrued benefits.

This is all about RPF full form in tax.

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