Payment from provident funds [Sections 10(11) and (12)] :
The following payments received by an assessee will be fully exempt from tax:
(a) Provident Fund (PF) to which Provident Fund Act, 1925, applies; or
(b) Public Provident Fund.
(c) Accumulated balance payable to an employee participating in a RPF (subject to certain conditions).
The conditions for the purpose of RPF above are as follows:
(i) The employee should have rendered continuous service with the employer from whom the amount is received for a period of at least five years; or
(ii) Where the employee had not rendered such continuous service the reason for the termination of his service should have been his ill -health or contraction or discontinuance of employer‘s business or any other cause beyond the control of the employee.
If such conditions are not satisfied the payments become taxable in the hands of the employee.