## Excess Employer Contribution to Specified Funds
Employer contribution to Recognised Provident Fund (RPF), National Pension Scheme (NPS), and Approved Superannuation Fund, taken together, is exempt up to ₹ 7,50,000 p.a. Any excess over this threshold is a taxable perquisite.
### Two Components of Perquisite
1. Excess Contribution itself = (Total Employer Contribution − ₹ 7,50,000) — taxable in the year of contribution.
2. Annual Accretion (Interest) on such excess contribution — taxable each year using the prescribed formula.
### Formula for Annual Accretion
> TP = (PC ÷ 2) × R + (PC₁ + TP₁) × R
Where:
- TP = Taxable value of accretion (interest) for the current year
- PC = Contribution in excess of ₹ 7,50,000 during the current year
- R = Interest Rate = Total interest for current year ÷ Average balance of fund
- Total interest = Closing balance − Opening balance − Employer contribution − Employee contribution (all of current year)
- Average balance = (Opening balance + Closing balance) ÷ 2
- PC₁ = Excess contribution in preceding years (cumulative)
- TP₁ = Taxable accretion of preceding years (cumulative)
### Logic
The PC/2 term assumes excess contribution flowed in evenly across the year, so only half-year interest is attributable. Past accretions (PC₁ + TP₁) earn a full year's interest at rate R.