A provident fund is a financial savings scheme that is typically set up by employers to help employees save a portion of their salary for their retirement. To compute the Employer PF (Provident Fund) and related contributions, the following logic is used:
Employer PF Contribution: The amount the employer contributes to the Provident Fund.
Employer Contribution to NPS: The amount the employer contributes to the National Pension System under section 80CCD(2).
NPS Deduction: Another deduction under the NPS, also under section 80CCD(2).
Steps to Calculate the Taxable Portion:
Sum the Contributions:
Add the Employer PF Contribution and the Employer Contribution to NPS.
Apply the Tax-Exempt Limit:
Subtract the tax-exempt limit of 750,000 from the total contribution.
This method ensures that only the contributions exceeding the tax-exempt limit are taxable.
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