How are EPF contributions treated for tax purposes?

EPF contributions are considered tax-deductible under Section 80C of the Income Tax Act, which allows individuals to reduce their taxable income by the amount invested in specified savings instruments, including EPF. This provision encourages long-term saving by providing tax relief to contributors.

When contributors make EPF contributions, they can claim this deduction, effectively lowering their taxable income for that assessment year. This tax benefit is especially advantageous for individuals looking to build their retirement corpus while simultaneously reducing their current tax liability.

It's important to note that while contributions are tax-deductible at the time they are made, the interest earned on EPF contributions is also tax-exempt, provided certain conditions are met. Upon withdrawal after a specified period of contribution, the entire amount received (contributions plus interest) is usually tax-free, further incentivizing employees to contribute to the EPF for retirement savings. Thus, the deduction under Section 80C is a crucial aspect of the tax treatment of EPF contributions.