We need to know the different kinds of provident fund schemes and their different tax treatments:

Recognized Provident Fund (RPF): This scheme is relevant when an organization employes 20 or more employees. It is compulsory that all the recognized provident fund get approved by the Commissioner of Income Tax.

In this scheme, tax is exempted up to 12% of employers' contribution. Employee's contribution get a tax benefit under 80C. Interest upto 9.5% interest on provident fund is exempted.

Payment at retirement is taxable except for the conditions where the employee continues service with the employer for 5 years or more. If the reason for discontinuation the service is for ill health, business discontinued by the employer or any reason beyond the reach of employee's control then the benefit is still available.

Unrecognized Provident Fund (URPF): This scheme are not approved by the Commissioner of Income Tax. Here, the employer together with the employee start the provident fund scheme. As they are not recognized by the Commissioner of Income Tax they have a different tax treatment from recognized provident fund.

Here, employer's contribution to the fund is tax exempted in the year of contribution. No benefit under 80C is available under employee's contribution to the fund. Interest towards provident fund is exempted.

Employee's own contribution is exempted from taxation but the interest in his own contribution is taxable under "income from other sources". Payment received under employer's contribution ans interest earned is taxable under "salaries".

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Public Provident Fund (PPF): Under this scheme, any individual can open a PPF account in banks or post office. Here employer does not contribute. An individual can contribute an amount not more than Rs.70,000 per year. This scheme can be enjoyed by those who are not under any other provident fund schemes.

Under PPF scheme, tax benefit under 80C is available and the interest from the fund is also tax exempted.

So you should know the type of provident fund and find out the tax benefit attached to that particular provident fund scheme.

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