The provident fund is a kind of an investment fund maintained by the employer (provident fund trustees, which are nominated by the employer, are responsible for provident fund management). Provident fund generates its revenue from the contribution made by employee and employer.
At the end of a given month, a percentage amount (normally 6% of the basic employee’s salary) is deducted from the employee’s pay cheque and the same amount is contributed by the employer. The total of the contribution from all employees is then deposited in a profit generating activity. Here comes the problem, generally this amount is deposited in a bank or other “interest” oriented activity and the interest collected is then distributed equally among all the employee on proportionate basis.
I am not saying that all provident funds are invested in a similar manner BUT one should check with their respective HR/Accounts department to know how their provident fund is generating the profit. If its banks or other interest oriented activities, then please decide based on the following verdict of Allah Almighty:
"Allah decreases interest and increases sadqah"