Section 10(11) Income Tax Exemption for Statutory Provident Funds and GPF
Section 10(11) of the Income-tax Act, 1961 exempts qualifying payments from statutory provident funds and certain provident funds established and notified by the Central Government. However, interest attributable to contributions exceeding prescribed annual thresholds is taxable under the rules introduced from financial year 2021-22.
What does Section 10(11) provide?
Under the Income-tax Act, 1961, Section 10(11) excludes from total income any payment from a provident fund to which the Provident Funds Act, 1925 applies, or from another provident fund set up by the Central Government and notified by it in the Official Gazette, subject to the statutory proviso concerning interest on excess contributions.
The provision commonly covers payments from the General Provident Fund (GPF) and other qualifying statutory government provident funds. The precise legal status of the fund must be checked; a private or recognised provident fund does not automatically qualify under this clause.
Eligibility and amount exempt
| Question | Section 10(11) position |
|---|---|
| Eligible recipient | A person receiving a payment from a qualifying statutory or notified provident fund, generally a participating employee or other entitled beneficiary. |
| Qualifying fund | A provident fund covered by the Provident Funds Act, 1925, or a Central Government-established provident fund notified for the purpose of this clause. |
| Exempt amount | Qualifying fund payments, except any interest portion made taxable under the excess-contribution proviso and applicable rules. |
| Ordinary employee contributions | Tax treatment of contributions and available deductions is a separate question from exemption of withdrawals. |
Tax on provident fund interest from 1 April 2021
The Finance Act, 2021 inserted a proviso to Section 10(11). For interest accruing during the previous year on contributions made by the person on or after 1 April 2021, the exemption does not apply to the interest attributable to contributions exceeding the applicable annual threshold:
- Rs. 2,50,000: generally applies where the provident fund receives contributions from the employer as well as the employee.
- Rs. 5,00,000: applies where there is no employer contribution to that fund.
The thresholds concern the employee's contributions in a previous year; they are not a cap on the total fund balance or a universal ceiling on tax-free withdrawals. Rule 9D of the Income-tax Rules, 1962 provides for separate taxable and non-taxable contribution accounts and calculation of interest attributable to excess contributions.
Example: GPF without employer contributions
If an employee contributes Rs. 6,00,000 to a qualifying GPF account during a financial year and the employer makes no contribution, the Rs. 5,00,000 annual threshold is relevant. Interest attributable to the excess Rs. 1,00,000 contribution is calculated according to Rule 9D and may be taxable. It does not mean that Rs. 1,00,000 of the principal contribution itself becomes taxable under Section 10(11).
Statutory PF, recognised PF, PPF and other funds: differences
Section 10(11) is different from Section 10(12), which addresses accumulated balances due and becoming payable from recognised provident funds subject to the conditions of the Fourth Schedule, and from Section 10(11A), which specifically deals with payments from the Public Provident Fund scheme. Separate rules also apply to the National Pension System and other retirement savings arrangements. Do not use the Section 10(11) exemption merely because an account is described as a provident fund.
Documents and checks before claiming exemption
- Confirm whether the fund falls under the Provident Funds Act, 1925 or is a qualifying Central Government-notified fund.
- Keep the provident fund statement showing opening balance, contributions, employer contributions (if any), interest and withdrawals.
- Identify contributions made from 1 April 2021 onward and check the Rs. 2.5 lakh or Rs. 5 lakh threshold as applicable.
- Check the interest calculation under Rule 9D and any taxable amount reported by the fund administrator.
- Apply the law relevant to the financial year and assessment or tax year for which the return is filed.
Income-tax Act, 2025: current-law transition
The Income-tax Act, 2025 took effect from 1 April 2026. The section numbering and terminology of the 1961 Act should not automatically be used for the new tax-year framework. This article explains the historical Section 10(11) provision and its key interest restrictions; for a return governed by the 2025 Act, verify the corresponding exemption and operative rules in the enacted law and notifications.
Official legal references
- Income Tax Department: Income-tax legislation
- India Code: Income-tax Act, 1961, Income-tax Act, 2025 and Provident Funds Act, 1925
- Income Tax Department: rules, notifications and circulars (including Rule 9D)
- Income Tax e-Filing Portal
- Gazette of India: official notifications
Frequently asked questions
Is the entire GPF withdrawal tax-free?
Payments from a qualifying statutory provident fund generally fall within the exemption, but the interest attributable to excess post-1 April 2021 contributions may be taxable. Confirm the fund's classification and interest calculation.
Is EPF automatically exempt under Section 10(11)?
No. Recognised provident fund withdrawals are generally considered under the separate statutory provisions applicable to recognised provident funds, including Section 10(12) of the 1961 Act.
Does the Rs. 5 lakh threshold apply to all PF accounts?
No. The Rs. 5 lakh threshold applies only where the fund has no employer contribution. Otherwise, the Rs. 2.5 lakh threshold is generally relevant for this interest rule.
Last reviewed: 10 October 2026. This is general educational information; verify the law, notifications and fund rules applicable to your circumstances.