Tax deductions on contribution to employee provident fund – EPF

Employee contribution to EPF account for the previous year can be claimed as tax deduction under section 80C up to the maximum limit of Rs 1,50,000.

Please note, employer’s contribution and interest credited to the EPF (i.e interest on both employee and employer contribution) is not allowed as tax deduction under section 80C.

For instance, if you have contributed Rs 24,000 to your EPF account during the financial year 2018-19, then the whole amount of Rs 24,000 can be claimed as tax deduction under section 80C of income tax act, 1961 along with any other eligible investments.

Do you require to submit any tax proof to employer

To claim tax deduction under section 80C, you are required to submit tax proof to the satisfaction of the employer. For Instance in case of insurance premium you need to submit premium payment receipts.

However, in case of contribution to your employee provident fund or EPF account, you are not required to submit any tax proof as the amount invested into EPF is known to employer.

If you are planning to get full tax benefits of Rs 150,000 under section 80C by investing in any or all specified investment schemes, then first and foremost thing you should do is to know the exact amount you are going to contribute to EPF for the whole previous year. Deduct the amount to be contributed to EPF from the maximum limit of Rs 1,50,000 and then invest it in other specified investment to claim full tax benefit under section 80C.

For instance, if you have contributed Rs 32,000 to your EPF account during the financial year 2018-19, then balance amount of Rs 1,18,000 (Rs 1,50,000-Rs 32,000) can be invested in any other specified investments such as Public Provident Fund, Life Insurance and Sukanya samriddhi yojana to claim full tax benefit of section 80C.

If you have spent certain amount towards tuition fee and/or principal amount of home loan, then that can also be deducted in addition to the contribution to EPF to find out the net amount to be invested out of Rs 1,50,000 to get complete deduction under section 80C.

Here is a list of certain specified investments eligible for section 80C deduction within the overall limit of Rs 1,50,000 :

  • Life insurance premium
  • Contribution to Recognised provident fund which includes EPF
  • Contribution to Public provident fund or PPF
  • Investment in National saving certificate
  • Amount spent towards tuition fee
  • Contribution to sukanya samriddhi yojana scheme
  • Principal amount of home loan paid during the financial year including stamp duty, registration fee
  • ULIP of UTI
  • Approved superannuation fund
  • Notified pension fund
  • Notified deposit scheme of PSU/authority by law for development of housing projects or development of cities/towns/village.
  • Investment in debentures and equity shares of public company
  • 5 years term deposits in a bank or post office
  • Bonds of NABARD
  • Saving in Senior Citizens Saving Scheme

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.