Are your contribution to EPF, NPS taxable?

 Any amount exceeding Rs. 7.50 lakh contributed by the employer to approved provident fund accounts taken together shall be considered as perquisite in the hands of the employee.

An employer’s contribution to the provident fund account of his employee used to be totally tax-free in the employee’s hands without any monetary cap as long as it did not surpass 12 percent of the minimum wage and dearness allowance.

Whether contribution to VPF is also taken into account for arriving at ₹7.5 lakh per year figure?

However, the Finance Act, 2020 introduced an absolute limit of 7.50 lakh on the aggregate of contributions made by an employee to recognized provident fund, NPS (National Pension System) scheme, and an authorized superannuation fund taken together in one year.

employee provident fund

Any amount exceeding Rs. 7.50 lakh paid by the employer to these accounts taken together shall be considered as perquisite in the employee’s hands and shall be included in his salary and taxed at the slab rates. The interest or income earned in spite of such an excess contribution to all three accounts is often included in the employee’s perquisite value year after year.

Contribution to VPF(Voluntary Provident Fund) is considered as amount contributed by Employee to his own provident fund account and not Employer. Therefore the authorized limit shall not be considered when reaching the above limit of Rs. 7.50 lakh.


The question of adding the interest earned in respect of the contribution made by the previous employer in the above-mentioned limit of 7.50 lakh does not occur as this can not be regarded as an employer’s contribution.

Interest paid in respect of the contribution made by the former employer as well as the new employer is absolutely tax-free in your hands as long as you are working in one company or another. These will become taxable after your retirement to the extent not withdrawn by you.

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