How is the taxable portion of Employer PF and related contributions calculated?

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:

1. Employer PF Contribution: The amount the employer contributes to the Provident Fund.

2. Employer Contribution to NPS: The amount the employer contributes to the National Pension System under section 80CCD(2).

3. NPS Deduction: Another deduction under the NPS, also under section 80CCD(2).

Steps to Calculate the Taxable Portion:

1. Sum the Contributions:

   • Add the Employer PF Contribution and the Employer Contribution to NPS.

2. 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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