No Upper Limit On Contribution To EPF

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: Is cash equivalent of leave salary added for computing the valuation of rent-free accommodation perquisite? This leave salary has been encashed during the employment and not on termination of service. Also is relief u/s 89 would be permissible in such a case? — Naveen Rishi, rishi@ykkindia.com

"Salary" includes pay, allowances, bonus or commission or any monetary payment, by whatever name called, from one or more employers, payable monthly or otherwise but does not include a) DA unless it enters into the computation of superannuation or retirement benefits; b) employer’s contributions to the PF; c) exempt allowances and d) any payment and expenditure specifically excluded u/s 17. This definition is the same as per old Rules. The only change is that, medical allowances and reimbursement for treatment of serious illnesses as prescribed in proviso below Sec. 17(2vi) have now been excluded.

Accordingly, the leave salary is included. It will be eligible for the benefit of Sec. 89.

In 1990s you used to advice investment up to the hilt in PPF. Later, you said that the ICICI Bonds were better. And now, you are once again stating that one should contribute the maximum permitted amount of Rs 70,000 to PPF, even if a part (or whole) of it does not attract the rebate u/s 88. Now that the Budget-03 has proposed to change the rate from 9 per cent to 8 per cent, are you changing your opinion? Kindly realise that frequent changes in your advice causes confusion and tarnishes your image. — Bipin Shah, multimech@hotmail.com

I am afraid, you are not keeping in touch with my articles. When interest rate was reduced from 12 per cent to 11 per cent, I advised my readers to withdraw from PPF as much as possible, and go to pure-growth, open-ended, debt-based (PODs) mutual fund schemes. The returns on PODs at that juncture were around 15 per cent, tax-free (= after-tax take home). The current rate of PPF is 8 per cent and the MFs is over 10 per cent. Nonetheless, I am advising them not to withdraw from PPF and contribute to it as much and as soon as possible in the wake of overall interest rates becoming softer.